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Micron Technology (MU - Free Report) is the global king of memory chip technology and a driving force in the 4th Industrial Revolution. The company continues to impress analysts and investors alike, with MU shares having more than doubled since the end of August. The stock looks like it still has legs to keep this rally alive.
Micron's savvy management team sizably raised guidance for its fiscal Q2 quarter (February quarter earnings) across the income statement for revenues, margins, and earnings as demand for semiconductors explodes. This has catalyzed analysts to raise their price targets and EPS estimates alike, propelling MU into a Zacks Rank #1 (Strong Buy).
COVID Impact
The world digitalized by years in a matter of months during this Pandemic as global economies were forced to leverage advanced technology in order to remain competitive amid the stay-at-home initiative. As economies recover, enterprise and consumer spending are poised to surge, and cutting-edge tech will be one of the first things this capital goes to. We are on the verge of hyperscaling super-cycle, and Micron is positioned to benefit heavily.
The 4th Industrial Revolution is taking off, and COVID-19 has catalyzed its acceleration. The digitalization of 2020 has ignited the world's thirst for advanced tech, and this is just the beginning.
The Business Attraction
The companies two largest segments are dynamic random-access memory (DRAM) and NAND (aka NAND flash memory), with end markets that include data centers, mobile tech, PCs, graphics, and automotive. These end markets have proliferating demand for Micron's cutting-edge chips.
DRAM is expected to maintain a long-term compounded annual growth rate (CAGR) of mid-to-high teens. The rapidly expanding NAND market is expected to yield Micron a CAGR of approximately 30% as long-term demand for this technology accelerates. Micron's management team is also anticipating sizable cost reductions in the coming years.
DRAM made up 70% of the company's total topline according to its November quarter earnings, while Micron's growing NAND division made up 27% of revenues. Roughly 40% of its sales are propelled by its compute and networking segment (CNBU), which has been a beneficiary of the hyperscaling resurgence as businesses start to scale their data centers for cloud-computing, AI, data analytics, etc. CNBU saw 29% year-over-year expansion in its November quarter results (fiscal Q1).
The company's second-largest segment is mobile, which is poised to blast off in the nascent 5G super cycle of smartphones and the internet of this (IoT). Micron has a leading position in this space.
Upcoming Earnings Report
Micron is reporting its February quarter results (fiscal Q2) on March 31st, and expectations are elevated. According to Zacks Consensus estimates, analysts are anticipating an EPS of $0.89 on sales of $6.23 billion, representing year-over-year growth of 98% and 30%, respectively.
This business has a lot to prove in this upcoming report, with investors' expectations reaching new highs. The markets have formed a pattern of buying-the-rumor of a strong quarter and selling-the-news when the robust results are unveiled this past earnings season.
Micron's recent guidance increase earlier this month solidifying many investors' already optimistic outlook for the business. Management rose its mid-point revenue guidance by over 7% and EPS by more than 27%.
Forward guidance and management sentiment will be the most important things to focus on in this upcoming quarterly report and earnings call that follows.
The Charts
MU has been a workhorse amid the tech sell-off these past 3 weeks, with every dip in the stock getting bought back up very quickly. You can see this bullish price action in just the last couple of trading days, with each morning dip being bought back up on sizable volume. MU has sizably outperformed the broader semiconductor space (represented by the iShare Semiconductor ETF (SOXX)) since August 21st, which you can see in the TradingView chart below.
Final Thoughts
Despite MU's substantial rally since August, the stock is still trading at a relative discount to the broader semiconductor sector, with a 12-month forward P/E of 13.2x compared to the sector's 19.4x. MU's resilience to broader tech sell-off illustrates this stock's bullish positioning in the semiconductor space, which is expected to have exuberant demand in the next 12-months.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
Bull Of The Day: Micron Technology (MU)
Micron Technology (MU - Free Report) is the global king of memory chip technology and a driving force in the 4th Industrial Revolution. The company continues to impress analysts and investors alike, with MU shares having more than doubled since the end of August. The stock looks like it still has legs to keep this rally alive.
Micron's savvy management team sizably raised guidance for its fiscal Q2 quarter (February quarter earnings) across the income statement for revenues, margins, and earnings as demand for semiconductors explodes. This has catalyzed analysts to raise their price targets and EPS estimates alike, propelling MU into a Zacks Rank #1 (Strong Buy).
COVID Impact
The world digitalized by years in a matter of months during this Pandemic as global economies were forced to leverage advanced technology in order to remain competitive amid the stay-at-home initiative. As economies recover, enterprise and consumer spending are poised to surge, and cutting-edge tech will be one of the first things this capital goes to. We are on the verge of hyperscaling super-cycle, and Micron is positioned to benefit heavily.
The 4th Industrial Revolution is taking off, and COVID-19 has catalyzed its acceleration. The digitalization of 2020 has ignited the world's thirst for advanced tech, and this is just the beginning.
The Business Attraction
The companies two largest segments are dynamic random-access memory (DRAM) and NAND (aka NAND flash memory), with end markets that include data centers, mobile tech, PCs, graphics, and automotive. These end markets have proliferating demand for Micron's cutting-edge chips.
DRAM is expected to maintain a long-term compounded annual growth rate (CAGR) of mid-to-high teens. The rapidly expanding NAND market is expected to yield Micron a CAGR of approximately 30% as long-term demand for this technology accelerates. Micron's management team is also anticipating sizable cost reductions in the coming years.
DRAM made up 70% of the company's total topline according to its November quarter earnings, while Micron's growing NAND division made up 27% of revenues. Roughly 40% of its sales are propelled by its compute and networking segment (CNBU), which has been a beneficiary of the hyperscaling resurgence as businesses start to scale their data centers for cloud-computing, AI, data analytics, etc. CNBU saw 29% year-over-year expansion in its November quarter results (fiscal Q1).
The company's second-largest segment is mobile, which is poised to blast off in the nascent 5G super cycle of smartphones and the internet of this (IoT). Micron has a leading position in this space.
Upcoming Earnings Report
Micron is reporting its February quarter results (fiscal Q2) on March 31st, and expectations are elevated. According to Zacks Consensus estimates, analysts are anticipating an EPS of $0.89 on sales of $6.23 billion, representing year-over-year growth of 98% and 30%, respectively.
This business has a lot to prove in this upcoming report, with investors' expectations reaching new highs. The markets have formed a pattern of buying-the-rumor of a strong quarter and selling-the-news when the robust results are unveiled this past earnings season.
Micron's recent guidance increase earlier this month solidifying many investors' already optimistic outlook for the business. Management rose its mid-point revenue guidance by over 7% and EPS by more than 27%.
Forward guidance and management sentiment will be the most important things to focus on in this upcoming quarterly report and earnings call that follows.
The Charts
MU has been a workhorse amid the tech sell-off these past 3 weeks, with every dip in the stock getting bought back up very quickly. You can see this bullish price action in just the last couple of trading days, with each morning dip being bought back up on sizable volume. MU has sizably outperformed the broader semiconductor space (represented by the iShare Semiconductor ETF (SOXX)) since August 21st, which you can see in the TradingView chart below.
Final Thoughts
Despite MU's substantial rally since August, the stock is still trading at a relative discount to the broader semiconductor sector, with a 12-month forward P/E of 13.2x compared to the sector's 19.4x. MU's resilience to broader tech sell-off illustrates this stock's bullish positioning in the semiconductor space, which is expected to have exuberant demand in the next 12-months.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
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