Micron (NASDAQ:MU) shares are struggling this month, even as the S&P 500 sits at a record high. The stock has stayed stuck in a range despite strong revenue growth and guidance in its latest earnings report. It was recently trading at $1,040, about 18% below its high for the year.
Micron Technology is Seeing Strong Growth
Micron and other top companies in the memory industry are wavering this month, even after reporting strong earnings. In a recent report, Micron said that its revenue jumped by 379% to $54.2 billion, with its annual figure reaching $133 billion. This growth was driven by its DRAM business, which made $39.8 billion during the quarter.
Micron’s gross margin jumped to 87%, while its net income soared to $38.4 billion. Management also expects the growth to continue, guiding for first-quarter revenue of more than $61.5 billion against operating expenses of just $2 billion.
Despite this growth, Micron is one of the cheapest stocks on Wall Street. It trades at a forward P/E ratio of 7, far below the S&P 500’s multiple of 19.1. The same is true of other memory makers like Samsung Electronics, SK Hynix, and SanDisk.
In addition to its revenue growth, Micron has a major catalyst. Analysts expect that it will announce a big share buyback in December when the CHIPS Act restrictions end. Based on its valuation and the $73 billion it has on hand, it may announce as much as $50 billion in repurchases.
Micron Stock Has Struggled Amid AI and Cyclical Jitters
There are two main reasons why Micron shares have wavered. First, there are still substantial concerns about the AI industry, with some analysts warning that the bubble will burst soon. Such a move would have a significant impact on companies across the industry.
Second, investors are concerned about the cyclical nature of the memory industry. Historically, periods of strong memory demand are usually followed by periods of weak demand and saturation. A good example of this is what happened in 2023 when Micron’s revenue dropped to $15.4 billion from $30.7 billion a year earlier.
Micron and other companies have moved to offset these concerns by creating long-term deals with customers. These deals have floor and ceiling prices, which give it future visibility of its business. The management said:
"These multi-year take-or-pay agreements sharpen our long-term supply planning and enhance the durability and predictability of our strong financial performance."
Top analysts believe that the Micron stock is about to pop. DA Davidson’s Gil Luria recently hiked his target from $2,100 to $3,000, while Needham’s Quinn Bolton hiked to $1,650. Benzinga data shows that the average target among analysts is $1,463, up by 42% from the current level.
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