Micron stock due for a rebound?

Micron Technology Inc., the world’s fifth-largest semiconductor company, specialises in the development and production of memory and storage solutions. Micron´s products are essential for powering AI and 5G technologies in consumer devices, networks, and data centers, with applications in industries like healthcare and automotive.

Despite strong fundamental development, Microns share price has decreased by approximately 40% since mid-June, eliminating six months gain. Interestingly, nothing has really changed fundamentally —only the sentiment. From late 2023 to mid-2024, AI stocks were highly sought after, but then the excitement faded.

Regardless of the share price decline, Micron remains a prominent player in the memory industry and is poised to continue to benefit from advances in AI. With purpose-built memory and storage solutions, Micron facilitates generative AI training, AI-generated content, and more. The company adeptly delivers the speed and capacity needed to run generative AI applications on endpoint devices. In addition, Micron leverages AI in its smart factories, harnessing data to transform operations and achieve unprecedented levels of output, yield, and quality in its industry-leading AI memory and storage solutions.

In its most recent report (fiscal Q3), Micron delivered a strong performance. Earnings Per Share (EPS) of $0.62 beat the consensus estimate by $0.09, a 17% beat. Revenues reached $6.81 billion, beating expectations by $140 million and up 81.6% year-on-year. Operating cash flow also improved significantly to $2.48 billion from $1.22 billion in the previous quarter.

Micron achieved a record high in data center SSD revenue and continued to gain market share in high-margin products such as High Bandwidth Memory. The CEO expressed enthusiasm about the expanding AI-driven opportunities, noting that Micron is well-positioned to achieve substantial revenue growth in fiscal 2025. For fiscal Q4, Micron provided guidance with anticipated revenues of $7.6 billion, slightly above the consensus estimate of $7.58 billion. The company also projected EPS of $1.08, compared to the consensus figure of $1.04. All in all, Micron delivered a fiscal Q3 report offering plenty of reasons for optimism about its prospects. There was nothing in the report that would justify a 40% drop in its stock price.

Micron could have significant potential for revenue and earnings growth. With opportunities in Memory AI, data center revenues, and other expanding markets, Micron could potentially achieve double-digit sales growth in the coming years. Additionally, the company may benefit from AI-driven efficiencies and other strategies aimed at maximising profitability.

However, Micron faces competition, along with geopolitical risks and other factors that could affect demand. The share may also experience volatility if the economy slows, or interest rates stay elevated. Additionally, Micron operates in a highly cyclical industry, where its products are susceptible to price declines due to oversupply and other market dynamics. Despite these challenges, the recent decline in the stock, coupled with strengthened fundamentals, makes Micron an intersting opportunity. With the next report expected on September 25th, it wouldn’t be a surprise if Micron emerges as one of the AI winners for the remainder of 2024.

Micron (MU), one-year daily chart