Back to top

Better Buy: Micron (MU) vs. Nvidia (NVDA) Stock

Read MoreHide Full Article

Shares of Micron (MU - Free Report) and Nvidia (NVDA - Free Report) both surged on Monday, which helped buck a recent downward trend for the two chip makers. Both of the semiconductor powers are also currently Zacks Rank #1 (Strong Buy) stocks. So let’s dive into some of Micron and Nvidia’s current fundamentals to see if either stock looks more appealing at the moment.

Stock Movement

One of the best places for investors to start when evaluating a stock is its price movement. Before today’s climb, Nvidia had seen its stock price soar 1,079% over the last three years, which outpaces Micron’s 185% climb. Over the last two years, the stocks are a little more evenly matched, with NVDA up 416% compared to MU’s 332% expansion—both of which crush Wall Street darling Amazon’s (AMZN - Free Report) 135%  climb as well as fellow chip giant Intel’s (INTC - Free Report) 52%.

Narrowing down our focus, MU stock has climbed above NVDA over the last year, up 85% compared to roughly 73% for its peer. Investors should also note that 2018 has not been as kind to either Micron or Nvidia. Still, Micron has seen its stock price surge roughly 32%, while Nvidia has jumped 24% since the start of the year.

More recently, MU and NVDA have both sunk roughly 9% during the last month, with both sitting below their 52-week highs. This should be good news since both stocks could be purchased at a lower price than they have traded at recently. But investors also need to understand their current valuation picture.

Valuation

Coming into Monday, Micron stock was trading at 4.7X forward 12-month Zacks Consensus EPS estimates, which marks a discount compared the S&P 500’s 16.8X and its industry’s 11.3 X—which includes Advanced Micro Devices (AMD - Free Report) and Texas Instruments (TXN - Free Report) . Over the last year, Micron stock has traded as high as 6.8X, as low as 4.1X, and rocks a one-year median of 5.5X.

At 33.1X, NVDA is trading at a significant premium compared to Micron, its industry, and the S&P. With that said, Nvidia stock has traded as high as 57.4X over the last year, with a one-year median of 44.1X, and it is currently trading just above its year-long low of 32.9X

 

Stepping out a bit further, investors should be able to see that it is not too much of a stretch to say that Nvidia stock appears rather attractive at this current valuation. Meanwhile, Micron stock looks like one of the stronger value plays on the market, especially considering its growth projections.

Outlook

Now let’s look ahead because there is little reason to buy stocks that don’t seem to present any real ability to keep on climbing based on expanding top and bottom lines.

Our current Zacks Consensus Estimates are calling for Micron’s fiscal fourth-quarter revenues to hit $8.22 billion, which would mark over a 33.8% climb from the year-ago period. Micron’s fiscal 2018 revenues are projected to soar over 48% to reach $30.13 billion. Moving onto the other end of the income statement, the company’s full-year earnings are expected to soar over 136% to reach $11.72 per share, while its Q4 EPS figure is expected to expand by 63% to hit $3.30 per share.

Transitioning to Nvidia, the company is projected to report Q2 fiscal 2019 revenues of $3.11 billion, representing a roughly 39% jump from the year-ago period. For its current full-year, Nvidia’s revenues are expected to surge nearly 36% to touch $13.18 billion. The company’s adjusted earnings are expected to expand by just over 81% this quarter and 61% for the year.

Bottom Line

Both Nvidia and Micron are currently Zacks Rank #1 (Strong Buy) stocks, with MU sporting an overall “A” VGM score and NVDA rocking an “A” grade for Growth in our Style Scores system. Investors will also be pleased to note that NVDA and MU have received a ton of earnings estimate revisions recently.

Micron has earned eight upward earnings estimate revisions for the full-year, with 100% agreement to the upside, all within the last 30 days. Likewise, Nvidia has received 12 full-year revisions against zero downgrades, over the last 60 days.

Clearly, it is hard to go wrong with either stock at the moment as both are projected to experience strong top and bottom line growth. The companies also operate in a growth industry and have set their sights on new areas just starting to boom, from AI to self-driving vehicle technology. Still, at the moment, the advantage has to go to Micron because of its outstanding value.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>



More from Zacks Stocks in the News

You May Like