Memory-chip maker Micron Technology (MU) is benefiting from an improving business climate, which has boosted MU stock. After a pullback from its recent surge, some investors might be wondering: Is Micron stock a buy right now? X The memory-chip market hit the skids in the second half of 2018 when sales of smartphones, personal computers,
Memory-chip maker Micron Technology (MU) is benefiting from an improving business climate, which has boosted MU stock. After a pullback from its recent surge, some investors might be wondering: Is Micron stock a buy right now?
The memory-chip market hit the skids in the second half of 2018 when sales of smartphones, personal computers, servers and other gear slowed. But memory-chip sales rebounded in late 2020.
Boise, Idaho-based Micron makes two main types of memory chips: DRAM and Nand. Dynamic random-access memory, or DRAM, accounted for 73% of Micron’s revenue in its fiscal third quarter. Nand flash memory accounted for 24% of its revenue during the period.
DRAM chips act as the main memory in PCs, smartphones and other devices, working closely with central processing units. Nand flash provides longer-term data storage.
In DRAM chips, MU stock competes with South Korea’s Samsung Electronics and SK Hynix.
In Nand flash chips, Micron competes with Samsung, SK Hynix, Kioxia, Western Digital (WDC) and Intel (INTC). On Oct. 19, Intel announced a deal to sell its Nand memory chip business to SK Hynix for $9 billion.
MU Stock Fundamental Analysis
On June 30, Micron beat Wall Street’s targets for its fiscal third quarter and guided higher for the current period. But MU stock fell 5.7% on the report. Investors fretted about moderating chip cost reductions and rising capital expenses.
Micron earned an adjusted $1.88 a share on sales of $7.42 billion in the quarter ended June 3. Analysts expected earnings of $1.72 a share on sales of $7.24 billion. On a year-over-year basis, Micron earnings jumped 129% while sales increased 36%.
It was Micron’s fifth consecutive quarter of sales growth on a year-over-year basis, after five down quarters. Micron’s earnings rose for the fourth straight quarter, after six down quarters.
For the current quarter, Micron expects to earn an adjusted $2.30 a share on sales of $8.2 billion. Wall Street is predicting earnings of $2.18 a share on sales of $7.88 billion in Micron’s fiscal fourth quarter. In the year-earlier period, Micron earned an adjusted $1.08 a share on sales of $6.06 billion.
The company expects DRAM and Nand chip supplies to remain tight into 2022, which should allow Micron to raise prices.
Micron Touts Next-Generation Memory Chips
On June 1, during a keynote presentation at the Computex conference, Chief Executive Sanjay Mehrotra boasted about Micron’s technological advancements. MU stock rose a fraction on the news.
Micron unveiled memory and storage innovations across its portfolio based on its industry-leading 176-layer Nand and 1-alpha DRAM technology.
“As artificial intelligence and 5G reach mainstream deployment, they are creating dramatic new potential for data in the post-pandemic world,” Mehrotra said. “This transformation presents an opportunity for accelerating innovation to address customer needs. Today we are debuting new memory and storage solutions that accelerate innovation, from powerful data center servers and faster client devices to intelligent vehicles at the edge.”
Micron Stock Technical Analysis
On Nov. 6, Micron stock broke out of a cup-with-handle base at a buy point of 54.92, according to IBD MarketSmith charts. A three-weeks-tight pattern in late December offered an add-on buy point at 74.71.
MU stock hit a nearly 21-year high of 96.96 on April 12, before the spring tech stock sell-off. It reached its all-time high of 97.50 in July 2000 during the dot-com bubble.
Micron stock has an IBD Relative Strength Rating of 58 out of a possible 99, according to the IBD Stock Checkup tool. That means it has outperformed 58% of stocks over the past 12 months. The best growth stocks typically have RS Ratings of at least 80.
MU stock has an IBD Composite Rating of 88 out of 99. The best growth stocks have a Composite Rating of 90 or better. IBD’s Composite Rating combines five separate proprietary ratings into one easy-to-use rating.
However, Micron stock has an IBD Accumulation/Distribution Rating of D-, indicating institutional selling of MU stock.
Is MU Stock A Buy Right Now?
Micron stock is not a buy right now. It needs to form a new base in the right market conditions before setting a new potential buy point. Check out IBD’s Big Picture column for the current market direction.
MU stock ended the regular session on July 7 at 78.22. In a negative sign, MU stock is trading below its 50-day moving average line.
Micron ranks second out of nine stocks in IBD’s Computer-Data Storage industry group. The group ranks No. 76 out of 197 industry groups that IBD tracks. Growth stock investors should focus on the leading stocks in the top 40 industry groups.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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