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The company projects fiscal third-quarter revenues to be $8.8 billion (+/- $200 million). The Zacks Consensus Estimate for the top line is pegged at $8.84 billion, which implies year-over-year growth of 29.7%.
Meanwhile, Micron estimates adjusted earnings of $1.57 (+/-10 cents). The consensus mark for the bottom line has been revised upward by a couple of cents to $1.59 per share over the past seven days, which indicates a year-over-year improvement of 156.5%.
Image Source: Zacks Investment Research
The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 10.7%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
Micron Technology, Inc. Price, Consensus and EPS Surprise
Our proven model predicts an earnings beat for Micron this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is the case here.
MU’s Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate ($1.69 per share) and the Zacks Consensus Estimate ($1.59 per share), is +6.38%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Micron’s third-quarter results are poised to reflect a significant boost from the growing demand for memory chips, fueled by the increasing adoption of GPU-enabled artificial intelligence (AI) servers. As data center operators expand their infrastructure to support generative AI and large language models, memory chips have become essential components. This surge in demand for AI-driven technologies is likely to have bolstered Micron’s revenues during the quarter under review.
Another positive factor is the improving supply-demand dynamics in the memory chip market. For several quarters, Micron faced headwinds from excess inventory across various sectors, which heavily impacted its financial results. However, conditions have improved over the past year, which has resulted in improvements in prices for its DRAM chips. According to the Zacks Consensus Estimate, DRAM revenues for the third quarter are expected to hit $7 billion, marking impressive 49.2% year-over-year growth.
However, pricing headwinds across its NAND products are likely to somewhat offset the positive effect of strong DRAM demand. NAND pricing, which declined sequentially in the second quarter, remains challenged by oversupply conditions and slower-than-expected price recovery. The consensus mark for NAND revenues is pegged at $1.74 billion, implying a 15.6% decrease from the same period last year.
Pricing pressure across NAND products and ongoing startup costs at its new DRAM production facility in Idaho are likely to have weighed on margins. The company predicts a non-GAAP gross margin of 36.5% (+/- 100 basis points) for the third quarter, indicating a 140-basis-point contraction from the second quarter.
Moreover, inflationary pressures and macroeconomic uncertainties have dampened consumer spending, likely reducing demand for memory chips in key markets, such as smartphones and personal computers. Additionally, Micron’s heavy reliance on China poses a risk amid ongoing U.S.-China trade tensions.
Micron Share Price Performance
Year to date, Micron shares have rallied 46.9%, outperforming the Zacks Computer – Integrated Systems industry’s rise of 20.9%. The stock has also outperformed major semiconductor companies, including Broadcom (AVGO - Free Report) , NVIDIA (NVDA - Free Report) and Taiwan Semiconductor Manufacturing (TSM - Free Report) . Shares of Broadcom, NVIDIA and Taiwan Semiconductor Manufacturing have risen 7.8%, 7.1% and 6.1%, respectively.
YTD MU Stock Price Return Performance
Image Source: Zacks Investment Research
Micron’s Key Valuation Metric
From a valuation standpoint, MU appears to be trading at a discount relative to the industry and is trading well below its mean. Going by the price/sales ratio, the company’s shares currently trade at 3.15 forward sales, lower than 3.71 for the industry.
Image Source: Zacks Investment Research
MU stock also trades at a discounted multiple compared to Broadcom, NVIDIA and Taiwan Semiconductor Manufacturing. At present, Broadcom, NVIDIA and Taiwan Semiconductor Manufacturing have P/S multiples of 16.61X, 16.17X and 8.59X, respectively.
Investment Consideration for MU Stock
Micron is reaping the rewards of improving market dynamics, effective sales strategies and strong performance across its diverse business segments. A key driver of its top-line growth has been the improvement in data center inventory levels, coupled with stabilization in markets like automotive, industrial and other sectors. These developments reflect a healthier demand environment that has bolstered the company’s revenue trajectory.
Micron anticipates a favorable pricing environment for DRAM and NAND chips in the latter half of the year, boosting its revenue potential. The demand surge for AI servers has created a scarcity of advanced DRAM supplies, setting the stage for price increases. Additionally, the accelerating adoption of 5G in Internet of Things (IoT) devices and wireless infrastructure is expected to fuel further demand for Micron’s memory and storage solutions, enhancing its market position.
However, challenges persist. The ongoing U.S.-China trade tensions remain a critical risk factor. Given Micron’s substantial exposure to the Chinese market, any escalation in disputes could disrupt its supply chain or lead to new tariffs, directly impacting its margins. Moreover, while the pricing outlook for memory chips appears robust, the company’s reliance on lower-margin NAND products and slow progress in achieving manufacturing efficiencies could temper profitability growth in the near term.
Micron’s future looks promising, but navigating these headwinds will be essential to sustaining its momentum.
Conclusion: Hold MU Stock for Now
Micron is in a strong position to deliver solid growth, driven by rising demand for memory chips in AI servers and improving market dynamics. However, challenges like trade tensions with China and margin pressures should temper expectations for a significant breakout in the near term.
Given its attractive valuation and improving fundamentals, holding Micron stock for now seems like the best strategy. The company has strong potential, but investors should wait to see how the macroeconomic environment and trade relations evolve before making any aggressive moves. For now, it’s best to stay patient and monitor this stock heading into third-quarter earnings.
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Micron Gears Up to Report Q3 Earnings: Buy, Hold or Sell the Stock?
Key Takeaways
Micron Technology, Inc. (MU - Free Report) will report third-quarter fiscal 2025 results on June 25, after market close.
The company projects fiscal third-quarter revenues to be $8.8 billion (+/- $200 million). The Zacks Consensus Estimate for the top line is pegged at $8.84 billion, which implies year-over-year growth of 29.7%.
Meanwhile, Micron estimates adjusted earnings of $1.57 (+/-10 cents). The consensus mark for the bottom line has been revised upward by a couple of cents to $1.59 per share over the past seven days, which indicates a year-over-year improvement of 156.5%.
Image Source: Zacks Investment Research
The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 10.7%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
Micron Technology, Inc. Price, Consensus and EPS Surprise
Micron Technology, Inc. price-consensus-eps-surprise-chart | Micron Technology, Inc. Quote
Earnings Whispers for Micron
Our proven model predicts an earnings beat for Micron this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is the case here.
MU’s Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate ($1.69 per share) and the Zacks Consensus Estimate ($1.59 per share), is +6.38%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Micron’s Zacks Rank: MU carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Likely to Influence Micron’s Q3 Results
Micron’s third-quarter results are poised to reflect a significant boost from the growing demand for memory chips, fueled by the increasing adoption of GPU-enabled artificial intelligence (AI) servers. As data center operators expand their infrastructure to support generative AI and large language models, memory chips have become essential components. This surge in demand for AI-driven technologies is likely to have bolstered Micron’s revenues during the quarter under review.
Another positive factor is the improving supply-demand dynamics in the memory chip market. For several quarters, Micron faced headwinds from excess inventory across various sectors, which heavily impacted its financial results. However, conditions have improved over the past year, which has resulted in improvements in prices for its DRAM chips. According to the Zacks Consensus Estimate, DRAM revenues for the third quarter are expected to hit $7 billion, marking impressive 49.2% year-over-year growth.
However, pricing headwinds across its NAND products are likely to somewhat offset the positive effect of strong DRAM demand. NAND pricing, which declined sequentially in the second quarter, remains challenged by oversupply conditions and slower-than-expected price recovery. The consensus mark for NAND revenues is pegged at $1.74 billion, implying a 15.6% decrease from the same period last year.
Pricing pressure across NAND products and ongoing startup costs at its new DRAM production facility in Idaho are likely to have weighed on margins. The company predicts a non-GAAP gross margin of 36.5% (+/- 100 basis points) for the third quarter, indicating a 140-basis-point contraction from the second quarter.
Moreover, inflationary pressures and macroeconomic uncertainties have dampened consumer spending, likely reducing demand for memory chips in key markets, such as smartphones and personal computers. Additionally, Micron’s heavy reliance on China poses a risk amid ongoing U.S.-China trade tensions.
Micron Share Price Performance
Year to date, Micron shares have rallied 46.9%, outperforming the Zacks Computer – Integrated Systems industry’s rise of 20.9%. The stock has also outperformed major semiconductor companies, including Broadcom (AVGO - Free Report) , NVIDIA (NVDA - Free Report) and Taiwan Semiconductor Manufacturing (TSM - Free Report) . Shares of Broadcom, NVIDIA and Taiwan Semiconductor Manufacturing have risen 7.8%, 7.1% and 6.1%, respectively.
YTD MU Stock Price Return Performance
Image Source: Zacks Investment Research
Micron’s Key Valuation Metric
From a valuation standpoint, MU appears to be trading at a discount relative to the industry and is trading well below its mean. Going by the price/sales ratio, the company’s shares currently trade at 3.15 forward sales, lower than 3.71 for the industry.
Image Source: Zacks Investment Research
MU stock also trades at a discounted multiple compared to Broadcom, NVIDIA and Taiwan Semiconductor Manufacturing. At present, Broadcom, NVIDIA and Taiwan Semiconductor Manufacturing have P/S multiples of 16.61X, 16.17X and 8.59X, respectively.
Investment Consideration for MU Stock
Micron is reaping the rewards of improving market dynamics, effective sales strategies and strong performance across its diverse business segments. A key driver of its top-line growth has been the improvement in data center inventory levels, coupled with stabilization in markets like automotive, industrial and other sectors. These developments reflect a healthier demand environment that has bolstered the company’s revenue trajectory.
Micron anticipates a favorable pricing environment for DRAM and NAND chips in the latter half of the year, boosting its revenue potential. The demand surge for AI servers has created a scarcity of advanced DRAM supplies, setting the stage for price increases. Additionally, the accelerating adoption of 5G in Internet of Things (IoT) devices and wireless infrastructure is expected to fuel further demand for Micron’s memory and storage solutions, enhancing its market position.
However, challenges persist. The ongoing U.S.-China trade tensions remain a critical risk factor. Given Micron’s substantial exposure to the Chinese market, any escalation in disputes could disrupt its supply chain or lead to new tariffs, directly impacting its margins. Moreover, while the pricing outlook for memory chips appears robust, the company’s reliance on lower-margin NAND products and slow progress in achieving manufacturing efficiencies could temper profitability growth in the near term.
Micron’s future looks promising, but navigating these headwinds will be essential to sustaining its momentum.
Conclusion: Hold MU Stock for Now
Micron is in a strong position to deliver solid growth, driven by rising demand for memory chips in AI servers and improving market dynamics. However, challenges like trade tensions with China and margin pressures should temper expectations for a significant breakout in the near term.
Given its attractive valuation and improving fundamentals, holding Micron stock for now seems like the best strategy. The company has strong potential, but investors should wait to see how the macroeconomic environment and trade relations evolve before making any aggressive moves. For now, it’s best to stay patient and monitor this stock heading into third-quarter earnings.