Surprisingly, Micron Know-how (MU 5.62%) inventory turned in a disappointing efficiency on the inventory market in 2024. It clocked beneficial properties of simply 20%, regardless of delivering strong leads to latest 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. Nevertheless, it will not be stunning to see the inventory’s fortunes altering after Micron releases its fiscal 2025 first-quarter outcomes on Dec. 18.
Let’s examine why that could 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 practically 39% final 12 months, 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 Revenue (TTM) knowledge by YCharts.
Nevertheless, the reminiscence trade has been in turnaround mode this 12 months. It is pushed by catalysts reminiscent of artificial intelligence (AI) which can be driving a bounce in reminiscence consumption throughout a number of areas, reminiscent of knowledge facilities, smartphones, and PCs. For instance, the utilization of high-bandwidth reminiscence (HBM) in AI chips has elevated at an unimaginable tempo, because the likes of Nvidia have been integrating this kind 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 going on at a stronger-than-expected fee.
Nvidia points 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 improve.” This is nice information 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 reminiscent of HBM additionally clarify why the worldwide reminiscence market is predicted to generate $163 billion in income this 12 months, up considerably from $92 billion final 12 months.
Micron appears positioned to ship spectacular steerage as properly. That is as a result of the scale of the reminiscence market is predicted to bounce to $204 billion in 2025. HBM, after all, is ready to play a central function on this market’s development. Micron anticipates this particular sort of chip to generate $25 billion in income subsequent 12 months, 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 enhance. IDC estimates that the worldwide PC market might present 4.3% development in 2025, following a flat efficiency this 12 months. In the meantime, world smartphone gross sales are anticipated to develop within the low single digits subsequent 12 months.
The mixture of those components ought to make sure 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 latest quarters.
Terrific development and engaging valuation make shopping for the inventory a no brainer
Analysts count on Micron’s income to bounce 84% 12 months over 12 months to $8.71 billion within the first quarter of fiscal 2025. It’s anticipated to put up a revenue of $1.77 per share, in contrast to a lack of $0.95 per share in the identical quarter final 12 months. These numbers are properly inside Micron’s steerage 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 up to $8.78 per share from $1.30 per share within the earlier fiscal 12 months.
Lastly, Micron’s extremely low-cost valuation signifies that traders are getting an unimaginable 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 worth/earnings-to-growth ratio (PEG ratio) primarily based on its five-year estimated earnings development fee is simply 0.17.
A PEG ratio of lower than 1 signifies that a inventory is undervalued with respect to the expansion that it’s anticipated to ship. This makes Micron a high growth stock that traders can think about shopping for, because it appears set to soar increased this month, and subsequent 12 months as properly.