/Micron%20Technology%20Inc_logo%20and%20website-by%20Mojahid%20Mottakin%20via%20Shutterstock.jpg)
Valued at a market cap of $113.8 billion, Micron Technology (MU) is a major player in the global semiconductor industry. Micron specializes in memory and storage systems, and is a key supplier of DRAM (dynamic random-access memory), NAND flash memory, and other advanced technologies that power industries ranging from consumer electronics to data centers and artificial intelligence (AI).
Micron's products are used in a variety of applications, including smartphones, personal computers, automotive systems, and industrial devices. However, it operates in a highly cyclical industry, with demand fluctuations linked to macroeconomic conditions and the rapid evolution of technology.
But with AI's widespread adoption, there has been a significant increase in demand for semiconductors across numerous industries. AI and machine learning workloads in data centers, as well as the growing adoption of 5G, have all resulted in increased demand for memory and storage solutions, which has boosted Micron's performance in recent years.
MU stock has gained 23% year-to-date, compared to the tech-heavy Nasdaq Composite's ($NASX) gain of 26.8%. Micron ended fiscal 2024 strong, and the company will report its first quarter of fiscal 2025 results on Dec. 18. Let's see if Micron stock is a buy ahead of earnings.
Micron's Fiscal Q4 Earnings Performance
The company reported another strong quarter in fiscal Q4, with total revenue increasing by 92% to $7.7 billion. According to management, strong AI demand boosted the growth of its DRAM products. NAND's quarterly revenue also reached $1 billion for the first time in the fourth quarter of fiscal 2024.
In addition, Micron reported an adjusted profit of $1.18 per share, up from a loss of $1.07 per share in the year-ago quarter. Revenue increased by 61.6% to $25.1 billion in fiscal 2024, while adjusted earnings were $1.30, compared to a loss of $4.45 in fiscal 2023.
The rapid adoption of AI and machine learning across industries is a significant growth driver for Micron. The company's long-term potential is also based on its plans to build one facility in Idaho and four in New York as part of a $125 billion investment plan over the next two decades. Management got a head start on this plan when it received $6.1 billion as part of the CHIPS Act grant in April to construct manufacturing facilities in Idaho and New York.
Micron's balance sheet is relatively strong, with a prudent approach to debt and cash management. At the end of fiscal year 2024, it had $9.16 billion in cash, marketable investments, and restricted cash. The debt-to-equity ratio is also low, at 0.30.
Micron is a Dividend Stock, Too
During market upswings, the company prioritizes reinvestment in R&D and capital expenditures to maintain its competitive advantage, while also returning capital to shareholders through buybacks and dividends. AI-related capital expenditures totaled $8.12 billion in fiscal year 2024. Nonetheless, the company generated an adjusted free cash flow of $386 million.
Micron is also a dividend stock with a quarterly dividend of $0.115 per share. It has a forward yield of 0.45%, while the technology sector's average yield is 1.37%. However, a low payout ratio of 5.1% suggests there is scope for dividend growth as earnings and cash flows increase in the future.
What's the Q1 Forecast for MU Stock?
The company expects revenue to increase by approximately 89% to $8.7 billion in the first quarter (plus or minus $200 million). It also projects a profit of $1.74 (plus or minus $0.08) per share. This compares to a loss of $0.95 per share in the prior year quarter.
While management did not provide guidance for fiscal 2025, analysts who follow Micron stock expect revenue to rise by 52.2% in fiscal 2025, followed by another 20.6% in fiscal 2026. Profits are expected to increase by an impressive 586.7% to $8.93 per share. Earnings could further rise by 44% to $12.86 in fiscal 2026.
Is Micron Stock a Buy?
Overall, Wall Street is strongly bullish about Micron stock. Out of the 27 analysts covering MU, 23 have rated it a "strong buy," two suggest a “moderate buy,” one rates it a “hold,” and one recommends a “strong sell.”
The stock’s average target price of $146.22 implies a 39.4% upside potential from Friday's close. Further, MU has a high target price of $250, which suggests the stock could gain as much as 138.5% over the next 12 months.
Valued at 11.5x forward fiscal 2025 earnings estimates, Micron stock is cheaper than its peers in the industry. Currently, Nvidia (NVDA) is trading at 48x forward 2025 earnings.
While the stock's cyclical nature poses challenges, Micron's strong market position in the semiconductor industry, emphasis on innovation, and alignment with long-term growth drivers make it an appealing long-term investment for those who can tolerate volatility.
