Micron Technology Inc (NASDAQ: MU) experienced a significant surge in its stock price, climbing over 17% in premarket trading on September 26.
This uptick followed the company’s announcement of impressive fourth-quarter earnings and a robust outlook for the first quarter of fiscal 2025, highlighting strong demand in the artificial intelligence (AI) and data center markets.
For the quarter ending August 29, Micron reported an adjusted earnings per share (EPS) of $1.18, surpassing analysts’ expectations of $1.11.
The company’s revenue surged 93.3% year-over-year to $7.75 billion, surpassing the consensus estimate of $7.64 billion.
Adjusted gross margin rose to 36.5%, above the expected 34.7%, reflecting improved operational efficiency and cost management.
The remarkable growth was driven primarily by a surge in demand for high-bandwidth memory (HBM) and NAND flash memory products.
Micron’s NAND revenue reached a new record, with data center solid-state drive (SSD) sales exceeding $1 billion in quarterly revenue for the first time.
CEO Sanjay Mehrotra stated, “We are entering fiscal 2025 with the best competitive positioning in Micron’s history,” underscoring the company’s confidence in sustaining this momentum.
Forward guidance
Looking ahead, Micron provided optimistic guidance for the first quarter of fiscal 2025.
The company expects revenue between $8.5 billion and $8.9 billion, with a midpoint of $8.7 billion, surpassing the $8.32 billion estimated by analysts.
Adjusted EPS is projected to be between $1.66 and $1.82, with a midpoint of $1.74, also exceeding the consensus estimate of $1.52.
Adjusted gross margin is anticipated to be between 38.5% and 40.5%, reflecting continued strength in the company’s core markets.
Analysts’ take
Wall Street analysts responded positively to Micron’s performance and guidance.
Bank of America analyst Vivek Arya reiterated a “Buy” rating and raised the price target from $110 to $125.
Arya highlighted Micron’s supply discipline and growth in AI-levered HBM sales, noting that HBM is becoming a “two-horse race” between Micron and South Korea’s SK Hynix.
Mizuho analyst Vijay Rakesh maintained an “Outperform” rating with a price target of $135, citing strength in both NAND and DRAM pricing and a promising outlook for HBM in 2025.
Morgan Stanley analyst Joseph Moore, however, maintained an “Equal-Weight” rating with a $114 price target.
While acknowledging the strong guidance, Moore expressed concerns about potential oversupply in the memory market, suggesting that prices are rising in a market that appears slightly oversupplied.
He mentioned that better risk-reward opportunities might exist in companies like Nvidia, Broadcom, and Western Digital.
HBM investments paying off
Fundamentally, Micron is capitalizing on the increasing demand for memory products fueled by AI and high-performance computing applications.
The company’s investments in HBM technology are paying off, positioning it as a key player in a market projected to expand significantly.
According to Micron, HBM’s total addressable market is expected to grow from $4 billion in 2023 to $25 billion in 2025, with HBM consuming around 6% of total bits by then.
Micron plans to ramp up production of its HBM3E products in early 2025, aiming to capture a substantial share of this growing market.
Micron’s financial health remains solid.
The company generated $3.41 billion in cash flow from operations during the quarter and reported $323 million in free cash flow, despite significant capital expenditures aimed at expanding production capacity.
The company ended fiscal 2024 with $9.16 billion in cash, marketable investments, and restricted cash.
Micron also declared a quarterly dividend of $0.115 per share, yielding approximately 0.48%, payable on October 23 to shareholders of record as of October 7.
Valuation & Capex
From a valuation standpoint, Micron’s forward-looking metrics suggest strong growth potential.
The company’s forward price-to-earnings ratio reflects optimistic earnings expectations for fiscal 2025 and beyond.
Micron plans to invest $8.1 billion in capital expenditures in fiscal 2025, focusing on both greenfield fab construction and HBM capacity investments.
These strategic investments are expected to support the company’s long-term growth, despite the near-term increase in depreciation costs that may impact margins.
While some analysts express caution over potential market oversupply, the consensus leans towards a positive outlook for Micron.
The company’s strategic positioning in AI and data center markets, coupled with strong demand for its memory products, suggests that it is well-placed to benefit from industry trends.
With these fundamentals in place, it’s an opportune time to delve into the technical charts to assess the stock’s price trajectory and identify potential entry points.
Crosses $107 barrier
Micron Technology’s stock has fallen significantly from its June highs above $155.
However, after today’s surge strong upward momentum is expected.
Source: TradingView
The stock is expected to open above its near-term resistance at $107 today.
If the stock continues to trade above it and doesn’t fall below this level, bulls will regain control of the stock.
Hence investors who are bullish on the stock can buy it after today’s surge with a stop loss at $96.3.
If the bullish momentum prevails, the stock can again retest its June highs.
Traders who are bearish on the stock must exercise caution and refrain from shorting the stock as long as the stock trades above $107.
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