1 Growth Stock with Massive Potential

Every single function of a computer relies on its memory – and that’s not just for laptops and desktops. Mobile devices need robust memory capabilities, too. So do all of the appliances, wearables, and other gadgets that make up the Internet of Things (IoT). 

Memory and storage are key for emerging technologies like Artificial Intelligence (AI), Virtual Reality (VR), and Augmented Reality (AR). As memory and storage components become more advanced, technologies like self-driving cars will transition from experimental to mainstream. 

As technology expands to connect and automate more people and products, the need for memory hardware goes up. Demand saw a sudden spike during the pandemic, and all signs indicate that the market will continue to grow in coming years. That puts computer data storage and computer memory manufacturers in an excellent position for steady increases in revenue. 

So, if the market is expanding, why did Micron Technology stock go down? And more importantly, will Micron stock recover? Is now the right time to buy Micron stock? 

Micron Technology: Science Fiction Today 

Micron Technology has been in the business of building ever-more advanced memory and storage tools for more than four decades. The company says it is on a mission to “accelerate the transformation of information into intelligence.” 

In pursuit of that goal, Micron Technologies has a comprehensive suite of computer data storage and computer memory products. It has a strong presence in the USB flash drive market, as well as the flash memory (both NAND and NOR) and dynamic random access memory (DRAM) spaces. 

Outside of the production and distribution of these critical memory and storage products, Micron Technology is a powerful partner in the research and development of new technologies. Through its Micron Ventures division, the company is working with the following disruptors and innovators to bring the future of technology to market: 

  • Adapdix – edge AI and autonomous controls for advanced simulations and manufacturing systems 
  • Atlas AI – geospatial analytics platform
  • DayTwo – precision nutrition to induce remission for chronic metabolic conditions 
  • Drishti – AI-powered video analytics technology 
  • Eliyan – next-generation interconnects
  • holo|one – enterprise metaverse platform 
  • Iterative Scopes – a software-only gastrointestinal data company
  • Multiscale Technologies – data platform for materials innovation
  • Mythic – analog computer solutions for deployment of AI 
  • Nexar – a platform for connected services and apps
  • OmniTier – memory-centric AI computing solutions for life science applications
  • Paperspace – tools and infrastructure for accelerated computing
  • Pryon – enterprise knowledge platform that leverages AI 
  • READY Robotics – industrial robotics
  • Red Leader – 3D vision company developing edge computing
  • SambaNova Systems – support for next generation of AI computing
  • ScaleFlux – deployment of Computational Storage at scale 
  • Taranis – aerial imagery and analysis for agricultural applications 
  • Volocopter – electric air taxi pioneer

All of these sound like technology from science fiction, but every day, they are getting closer and closer to becoming the mainstream technological standards. Micron Technology intends to lead the way as traditional industries are disrupted with cutting-edge computing tools. 

Micron Technology Fiscal Q2 2022 Financial Results 

On March 29, 2022, Micron reported its fiscal second-quarter 2022 results for the period ending March 3, 2022.

CEO Sanjay Mehrotra couldn’t contain his enthusiasm. The company exceeded guidance for revenue and earnings to deliver “outstanding” first-half results. 

Highlights from the quarter include: 

  • Total Revenue – $7.79 billion (as compared to $7.69 billion in the fiscal first quarter of 2022 and $6.24 billion for the fiscal second quarter of 2021)
  • GAAP Net Income – $2.26 billion ($2.00 per diluted share)
  • Non-GAAP net income – $2.44 billion ($2.14 per diluted share)
  • Operating Cash Flow – $3.63 billion (as compared to $3.94 billion in the fiscal first quarter of 2022 and $3.06 billion for the fiscal second quarter of 2021)

With such positive results, some investors are puzzled. Why didn’t the fiscal Q2 financial results stop or reverse Micron stock’s downward trend? 

Why Did Micron Stock Drop? 

Micron stock lost nearly 25 percent of its value year-to-date, and share prices continued to slide after the earnings report. That’s something of a surprise, considering the earnings report was excellent.

On top of that, demand for Micron memory chips is far higher than supply. The company can easily increase prices by a significant percentage, which promises to drive growth in both revenue and earnings for the remainder of the fiscal year. 

It seems that Micron stock didn’t go down due to concerns about the company itself. Instead, investors appear to be selling based on analyst commentary regarding the larger industry.

A small but vocal minority of experts have indicated that high demand for consumer devices won’t survive another year. If accurate, reduced demand would put a damper on Micron’s revenue and earnings, along with the revenue and earnings of its peers. 

That pessimism prompted the highly-respected analysts at Barclay’s to downgrade one of Micron Technology’s competitorsAdvanced Micro Devices. It seems that Micron stock declined alongside Advanced Micro Devices as investors decided that the argument against one was transferable to the other. 

Will Micron Stock Go Up? 

Micron leadership suggests that the intense demand for its products isn’t likely to abate anytime soon. Data centers are growing in size and number, and consumers are transitioning to smartphones with 5G capabilities.

Meanwhile, the industrial and automotive markets are adopting advanced technology at a rapid rate – and as mentioned, Micron is heavily invested in supporting and developing the technologies of the future. 

All of those factors have analysts projecting that Micron’s fiscal 2022 revenue will grow by 21 percent year-over-year, and earnings will increase by 58 percent year-over-year.

For fiscal 2023, they expect a 20 percent increase in revenue and a 32 percent increase in earnings. Taken together, these expectations suggest Micron stock will recover – and that will likely happen quite soon. 

Is Micron Stock A Buy? 

At today’s low price, Micron stock looks like a bargain, but does it have the growth potential of a true value stock? Many believe the answer is yes.

CEO Sanjay Mehrotra made it clear that the company is pursuing an aggressive growth strategy. When fiscal second-quarter 2022 results were announced, he said, “Our product portfolio momentum is accelerating.” 

Finally, as of mid-April 2022, Micron’s price-to-earnings (P/E) ratio is at nine. That’s a bargain, no matter how you look at it. When considered alongside the company’s improving financial situation and its growing portfolio of high-demand products, it is quite likely that Micron stock is undervalued. 

Investors who buy Micron stock now will be on-board for the ride when the current trend reverses, and the stock reaches – and perhaps exceeds – its historical highs.

The current 12-month price forecasts range from $83 per share to $165 per share, with a median of $115. At the median, that means a gain of nearly 60 percent for those who buy Micron stock today. 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.