Micron Technology Inc
Micron Technology Inc
IBD Stock Analysis
- Stock ventured into buy zone out of cup-with-handle; entry at 89.15
- However, investors should tread carefully in current volatile market
- Keeping watch on stock may be best, or at least buy a small position
Industry Group Ranking
Cup with Handle
* Not real-time data. All data shown was captured at 1:22PM EST on 12/21/2021.
Micron Technology (MU) is the IBD Stock of the Day as the memory-chip maker touches an entry point. MU stock popped into a buy zone Tuesday after it forecast fiscal second-quarter profit and revenue well above analyst estimates.
Micron reported fiscal first-quarter earnings late Monday. Heading into the earnings report, Boise, Idaho-based Micron stock owned an 89.15 entry point out of a long cup-with-handle chart pattern. Shares jumped 10.5% to close at 90.68.
Amid general stock market volatility, investors may want to put off taking a position and monitor Micron stock. Or, investors could take a small position.
MU stock belongs to the IBD Computer Data Storage group, not a semiconductor group. The IBD Computer Data Storage group ranks No. 40 out of 197 industry groups tracked.
Micron in September issued guidance for its fiscal first quarter, which ended Dec. 2, that was well short of estimates. Management pointed to weakness in the personal computer market.
MU Stock: PC Market Outlook Improves
But its earnings report eased worries.
“Micron’s in-line fiscal Q1 but strong February quarter outlook addresses our key prior concern — a prolonged inventory digestion (and related price pressure) in the PC market,” Bank of America analyst Vivek Arya said in a note to clients. “Fiscal Q2 will likely be the bottom of this (mini) cycle.”
At Raymond James, analyst Chris Caso said in his note to clients: “As compared to three months ago, Micron has seen some stabilization in the PC market.”
Micron serves markets beyond PCs. It also sells memory chips built into smartphones, computer servers in internet data centers and automobiles.
“We believe Micron remains well-poised to benefit from sustained demand drivers (PC, data center, 5G smartphone) heading into calendar 2022 as data-centric and data-intensive applications continue to proliferate across most platforms,” JPMorgan analyst Harlan Sur said in a recent report.
He added: “From a long-term perspective, MU stock is executing well on cost-downs and management expects DRAM and NAND cost-per-bit (manufacturing) declines to be in line with the industry in fiscal 2022.”
Supply Chain Issues
Micron said in its first quarter it earned an adjusted $2.04 a share on sales of $7.69 billion. On a year-over-year basis, Micron earnings jumped 161% while sales rose 33%.
Analysts had expected Micron earnings of $2.10 a share on sales of $7.68 billion.
For its fiscal second quarter, Micron expects to earn an adjusted $1.95 a share on sales of $7.5 billion. Wall Street had predicted per-share earnings of $1.84 on sales of $7.29 billion.
Management said PC and automotive industry supply chain issues involving non-memory components would limit its potential revenue upside in the second quarter.
Deutsche Bank analyst Sidney Ho in a report said the outlook for Micron’s core DRAM memory chip market “appears to be better-than-feared.”
“We continue to believe that the current DRAM trough will be less severe and shorter than previously expected,” Ho added.
MU Stock Relative Strength Rating
With Tuesday’s gain, MU stock is up about 19% in 2021. MU stock holds a Relative Strength Rating of 76 out of a best-possible 99, according to IBD Stock Checkup.
“Over the last 10 years, semiconductor stocks have enjoyed significant multiple expansion — with multiples increasing from 13 times to 15 times free cash flow to 20 times to 25 times,” said Credit Suisse analyst John Pitzer in a report.
Pitzer went on to say, “During that same period, MU’s multiple, while cyclically volatile, has remained mostly unchanged. More consistent returns and a recognition of memory’s growing importance to the Data Economy will drive meaningful FCF growth and multiple expansion.”
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