Micron Technology, Inc. (MU Quick QuoteMU - Free Report) , a stalwart in the semiconductor industry, has demonstrated resilience amid market volatility, rewarding investors with substantial returns. The Boise, ID-based memory chip maker has significantly outperformed the tech sector and the broader S&P 500 index in the year-to-date (YTD) period.

Micron's robust performance can be attributed to its sustained focus on enhancing its product portfolio through innovations, continuous deal wins and an improving demand-supply environment for memory chips. These factors have driven impressive sales growth and bolstered investor confidence.

Micron's stock has surged 53.1% YTD, surpassing the Zacks Computer and Technology sector’s 29.6% rise and the S&P 500 index’s 17.6% increase. Closing at $130.69 as of Jul 8, shy of its 52-week high of $157.54 reached on Jun 18, 2024, the stock shows potential for further upward movement.

Let’s decode what factors could drive MU stock further.

YTD Stock Performance

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Positive Industry Trends

Micron's memory chips play a crucial role in GPU-enabled artificial intelligence (AI) servers, which are currently in high demand. The growing integration of generative AI and large language models in data centers is driving the necessity for advanced memory solutions. Given memory's vital importance for AI operations, Micron stands to benefit significantly from this trend.

In recent quarters, the memory chip industry has achieved a better balance between supply and demand. Micron previously faced difficulties due to customer inventory adjustments across various markets. However, there has been a recent improvement in this balance, leading to increased pricing for Micron’s Dynamic Random Access Memory (“DRAM”) and NAND products. This positive trend is expected to continue, bolstering Micron's financial performance in the near term.

Portfolio Strength Aids in Winning Deals

Micron boasts a comprehensive product lineup tailored for PCs, servers and the smartphone sector, encompassing both DRAM and NAND offerings. DRAM chips are essential components in PCs and servers, while NAND flash chips are crucial for smartphones and solid-state drives.

Micron's diversified product portfolio and consistent focus on innovation enable it to secure new deals. Its recently launched next-generation GDDR7 graphics memory, which offers the highest bit density in the industry, is currently being tested by Advanced Micro Devices, Inc. (AMD Quick QuoteAMD - Free Report) and Cadence Design Systems, Inc. (CDNS Quick QuoteCDNS - Free Report) .

Advanced Micro Devices plans to use GDDR7 graphics memory to create more responsive and realistic games. Cadence Design Systems will utilize GDDR7 to test and validate its GDDR7 PHY IP, continuing its tradition of building IPs with Micron.

Additionally, Micron is providing its high-bandwidth memory, HBM3E, for NVIDIA Corporation’s (NVDA Quick QuoteNVDA - Free Report) latest AI chip. NVIDIA is expected to use HBM3E to develop its H200 graphic processing units, which will replace the existing H100 chip. Micron previously announced that its HBM chips were sold out for 2024, with a significant portion of the 2025 supply already allocated.

Strong Performance and Impressive Prospects

Micron has been recovering from the financial difficulties experienced in late 2022 and early 2023. This improvement is evident from the company's financial results in the last few quarters. Its non-GAAP earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 73.2%.

Micron Technology, Inc. Price, Consensus and EPS Surprise

Micron Technology, Inc. price-consensus-eps-surprise-chart | Micron Technology, Inc. Quote

In the last reported results for the third quarter of fiscal 2024, Micron’s top and bottom lines both surpassed the consensus mark and witnessed significant year-over-year improvement as well. (Read more: Micron Crushes Q3 Earnings & Revenue Estimates, Up Y/Y)

The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $38.63 billion, which indicates year-over-year growth of approximately 55%. The consensus estimate for fiscal 2025 earnings is pegged at $9.32, which suggests a more than eightfold increase from the fiscal 2024 forecast of $1.16.

Estimate Revision Favoring the Stock

Reflecting the positive sentiment around Micron, the Zacks Consensus Estimate for earnings per share has seen upward revisions. Over the past 30 days, analysts have increased their estimates for both the current and next fiscal year. The earnings estimate for fiscal 2024 has been raised by 26% to $1.16 per share, while fiscal 2025 estimates have been revised upward by 15.3% to $9.32.

Image Source: Zacks Investment Research

Conclusion

In conclusion, Micron Technology is a must-have in any tech portfolio. Its vital role in the tech ecosystem and relentless focus on innovation makes it a compelling investment. As technological advancements spur the demand for high-performance memory and storage solutions, Micron stands to gain significantly.

Micron's financial stability further enhances its investment appeal. The company has substantial cash reserves, which provide a cushion against market fluctuations. At the end of the third quarter of fiscal 2024, Micron had $9.22 billion in cash and cash equivalents, with total liquidity reaching $11.7 billion. This robust financial standing enables Micron to continue investing in research and development, driving future innovation and growth.

MU has a Zacks Rank #2 (Buy) and a Growth Score of B at present. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 (Strong Buy) or 2 and a Growth Score of A or B offer solid investment opportunities. You can see the complete list of today's Zacks #1 Rank stocks here.