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Why You Should Buy Micron (MU) Stock Right Now

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Shares of Micron (MU - Free Report) climbed nearly 2% on Monday despite news last week that a Chinese court ordered the semiconductor giant to stop selling some of its memory chips in the world’s second-largest economy. So let’s see why Micron stock looks like such a great buy right now, allowing investors to feel comfortable shrugging off the recent Chinese ruling.

Recent News

Last week, a Chinese court ruled in favor of Taiwanese firm United Microelectronics’ patent infringement lawsuits against the American chip company. But Micron’s leadership was quick to assure investors that the affected products—Crucial and Ballistix-branded DRAM modules as well as solid state drives—make up just over 1% of the company’s annualized revenues.

Micron noted that it continues to expect its fiscal fourth quarter revenues to fall within its previously guided range of $8 billion to $8.4 billion. “Micron has a long-standing history of successful business operations in China, including a significant assembly and test manufacturing facility in Xi'an, as well as deep relationships with many valued China customers,” Micron senior VP of legal affairs Joel Poppen said in a statement.

“Micron will continue to aggressively defend against these unfounded patent infringement claims while continuing to work closely with its customers and partners.”

Stock Movement

The fact that the Chinese court ruling is not expected to present a significant impact on Micron’s top line came as welcome news to investors and might help its stock bounce back after a rough stretch. In fact, prior to Monday’s climb, shares of Micron had sunk roughly 11% over the last month.

Still, Micron stock has been on a stellar run over the last two years, with its stock price up 330% since July 2016. This climb crushes the S&P 500’s 86% surge as well as fellow growth giant Amazon’s (AMZN - Free Report) 130%. Investors will also see that Micron has outpaced its industry’s average—which includes the likes of Intel (INTC - Free Report) , Advanced Micro Devices (AMD - Free Report) , and Texas Instruments (TXN - Free Report) —since the start of the year.

 

Valuation

Now that we have touched on MU’s recent performance, it’s time to take a look at its current valuation picture. Right off the bat, shares of Micron currently rest roughly $10 below their 52-week high, meaning that MU stock technically costs less than it has over the last few months.

Diving a bit deeper, Micron stock might be one of the best value plays on Wall Street, for the simple fact that it is currently trading at 4.8X forward 12-month Zacks Consensus EPS estimates. This marks a significant discount compared to its industry’s 11.5X average, the S&P’s 17X, and blows away fellow chip power Nvidia’s (NVDA - Free Report) 34.5X.

Furthermore, Micron stock has traded as high as 6.9X and as low as 4.1X over the last year, and sports a one-year median of 5.4X. Therefore, investors should be able to say with a great degree of confidence that Micron stock presents solid value and is even cheaper than it has been throughout much of the last year.

Outlook

Our current Zacks Consensus Estimates are calling for Micron’s quarterly revenues to hit $8.22 billion, which would mark a roughly 34% climb from the year-ago period. Meanwhile, the company’s full-year revenues are projected to soar nearly 48% to reach $30.13 billion.

Moving onto the bottom line, Micron’s quarterly earnings are projected to surge roughly 63% to touch $3.30 per share. The company’s full-year earnings are expected to soar 136% to reach $11.72 per share.

Bottom Line

Micron is currently a Zacks Rank #1 (Strong Buy) and rocks an “A” grade for Value in our Style Scores system as well as an overall “A” VGM score. MU has also earned six upward earnings estimate revisions for its current quarter, against zero downward changes, all within the last 30 days. More importantly, during this same timeframe, Micron has received eight earnings estimate revisions, with 100% agreement to the upside, for its current fiscal year.

The company is positioned to expand further as the need for memory chips grows rapidly with the AI and self-driving vehicle revolutions set to heat up. Micron is also expected to continue to capitalize on the growing cloud computing industry, which the company noted is projected to see total capital expenditure jump from $50 billion this year to $108 billion by 2021.

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