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Proprietary Data Insights Financial Pros’ Top Meme Value Stock Searches in the Last Month
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Should You Buy Micron Technologies (MU) on a Pullback?
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Traders finally hit the sell button on semiconductor stocks Wednesday. High flyers from Nvidia (NVDA) to Super Micro Computers (SMCI) took a gut punch. One of the more interesting names that popped up in our TrackStar search data was Micron Technologies (MU). The company recently reported results exceeding expectations, with revenue of $6.81 billion, up 17% sequentially and 82% year-over-year. This was driven by high demand for AI-related products, particularly in the data center segment, where revenue grew by over 50% sequentially. Management also forecasted record revenues to continue as AI demand showed no signs of slowing. With shares off more than 20% from their highs, is this a buying opportunity? Micron Technologies’ Business Half a century ago, Micron developed dynamic random-access memory (DRAM), which our PC memory still uses today. Today, the company manufactures a rich portfolio of high-performance DRAM, NAND, and NOR memory and storage products under its Micron and Crucial brands. Its offerings power a wide range of applications, from data centers and intelligent edge devices to client and mobile user experiences, including cutting-edge solutions that fuel the data economy and advances in AI. Micron segments its business into the following areas:
How do their products feed the AI revolution? Their High Bandwidth Memory turbocharges data center AI, while high-capacity DRAM modules crunch numbers at lightning speed. At the edge, low-power memory enables AI in smartphones and autonomous vehicles. Micron’s SSDs act as the brain’s library, storing vast datasets for AI training. In emerging AI PCs, their advanced memory supports on-device intelligence. Financials
Source: Stock Analysis Micron’s revenues wax and wane with supply and demand for memory. Shortages after the pandemic allowed the company to charge more, expanding its gross margins. Since then, the gap in supply has closed, leading to a significant drop in revenues and margins. Recent AI-driven demand has helped the company recover from the steep fall in sales. Yet, it isn’t profitable on paper. However, Micron generated $5.4 billion in cash from operations, up from $1.6 billion last year, though down significantly from the $15.2 billion reached in 2022. Management reduced capex to match, dropping from $12.1 billion in 2022 to $6.7 billion in the trailing 12-month period. The company has maintained between $8.0-$9.0 billion in cash on hand, with total debt just shy of $14.0 billion. Currently, Micron pays a 0.34% dividend with no planned share buybacks. Valuation
Source: Seeking Alpha Because Micron isn’t profitable on paper, it has no P/E ratio, which differentiates it from its peers. However, its price-to-cash flow is the second cheapest, just above Taiwan Semiconductor’s (TSM). On most other metrics, such as price-to-sales, it’s the lowest, signifying investors aren’t willing to give it a growth premium like the rest. Growth
Source: Seeking Alpha While Micron put up great YoY revenue numbers, they pale in comparison to many of its peers. Plus, its forecasted revenue growth is the lowest of the group at just 7.4%. And notably, its revenue CAGR over the last three and five years has been negative. Profitability
Source: Seeking Alpha Micron’s profitability is also well below its peers, whether you’re looking at gross or net income margin. The only place where it’s not dead last is EBITDA margin, where it edges out Advanced Micro Devices (AMD). All of Micron’s returns, whether on equity, assets, or total capital, are negative, illustrating the challenges the company faces.
Our Opinion 4/10 Micron’s business may benefit from AI, but not to the same extent as other key players. Additionally, Micron faces more risk from commoditized computer memory’s boom and bust cycles. Unless you’re catching it at the bottom of one of those cycles, which we don’t believe we are, then it’s best to steer clear of the stock. |
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