Surprisingly, Micron Know-how (MU 5.62%) inventory turned in a disappointing efficiency on the inventory market in 2024. It clocked good points of simply 20%, regardless of delivering stable ends in current quarters that time towards excellent development within the firm’s income and earnings.
Shares of the reminiscence specialist are down 27% since hitting a 52-week excessive in mid-June. Nonetheless, it will not be shocking to see the inventory’s fortunes altering after Micron releases its fiscal 2025 first-quarter outcomes on Dec. 18.
Let’s examine why which may be the case.
Micron Know-how’s upcoming outcomes might exceed expectations
Micron Know-how is understood for manufacturing reminiscence chips for each computing and storage. This market is traditionally cyclical in nature, relying on the demand for private computer systems (PCs) and smartphones. This explains why the worldwide reminiscence market plunged almost 39% final yr, as per Gartner’s estimates, owing to a 4.4% drop in shipments of PCs, smartphones, and tablets.
The drop in system shipments was extra pronounced in 2022, with a decline of 11.9%. Not surprisingly, Micron’s monetary efficiency in 2022 and 2023 suffered.
MU Income (TTM) information by YCharts.
Nonetheless, the reminiscence trade has been in turnaround mode this yr. It is pushed by catalysts comparable to synthetic intelligence (AI) which are driving a soar in reminiscence consumption throughout a number of areas, comparable to information facilities, smartphones, and PCs. For instance, the utilization of high-bandwidth reminiscence (HBM) in AI chips has elevated at an unbelievable tempo, because the likes of Nvidia have been integrating this sort of reminiscence to make their AI accelerators extra highly effective.
Nvidia’s newest Blackwell B200 GPU is provided with 192 gigabytes (GB) of HBM, which is an enormous enchancment over the previous-generation H100’s 96 GB and H200’s 144 GB. This issue might assist Micron ship better-than-expected outcomes. That is as a result of when Nvidia launched its newest quarterly outcomes final month, administration identified that its Blackwell manufacturing ramp-up is occurring at a stronger-than-expected charge.
Nvidia factors out that it’s on observe to “exceed our earlier Blackwell income estimate of a number of billion {dollars} as our visibility into provide continues to extend.” That is excellent news for Micron, because the chipmaker has already been supplying its HBM chips to Nvidia. The stronger Blackwell demand might assist it beat the market’s expectations. Catalysts comparable to HBM additionally clarify why the worldwide reminiscence market is predicted to generate $163 billion in income this yr, up considerably from $92 billion final yr.
Micron appears positioned to ship spectacular steering as effectively. That is as a result of the scale of the reminiscence market is predicted to leap to $204 billion in 2025. HBM, after all, is about to play a central function on this market’s development. Micron anticipates this particular kind of chip to generate $25 billion in income subsequent yr, up from $4 billion in 2023.
On the similar time, new catalysts such because the incoming PC refresh cycle and the expansion within the smartphone market might give Micron an extra increase. IDC estimates that the worldwide PC market might present 4.3% development in 2025, following a flat efficiency this yr. In the meantime, world smartphone gross sales are anticipated to develop within the low single digits subsequent yr.
The mix of those components ought to be certain that the reminiscence market continues to stay in good well being in 2025. That ought to be sufficient to assist Micron maintain the spectacular development momentum that it has gained in current quarters.
Terrific development and engaging valuation make shopping for the inventory a no brainer
Analysts count on Micron’s income to leap 84% yr over yr to $8.71 billion within the first quarter of fiscal 2025. It’s anticipated to publish a revenue of $1.77 per share, in comparison with a lack of $0.95 per share in the identical quarter final yr. These numbers are effectively inside Micron’s steering vary. We’ve already seen that stronger demand from the likes of Nvidia might assist Micron beat consensus expectations, and that would ship the inventory hovering following its quarterly report.
On the similar time, Micron is predicted to report excellent top-line development of 52% in fiscal 2025 to $38 billion, whereas earnings are estimated to shoot as much as $8.78 per share from $1.30 per share within the earlier fiscal yr.
Lastly, Micron’s extremely low cost valuation implies that traders are getting an unbelievable deal on the inventory proper now. The chipmaker is buying and selling at simply 12 occasions ahead earnings, and Yahoo! Finance factors out that its value/earnings-to-growth ratio (PEG ratio) primarily based on its five-year estimated earnings development charge is simply 0.17.
A PEG ratio of lower than 1 implies that a inventory is undervalued with respect to the expansion that it’s anticipated to ship. This makes Micron a high development inventory that traders can take into account shopping for, because it appears set to soar larger this month, and subsequent yr as effectively.
