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Why Micron (MU) Stock Is A Strong Buy Right Now

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Micron (MU - Free Report) has seen its stock price slip over the last month on the back of potential trade war setbacks. Yet these fears seem to be overblown. Plus, Micron stock offers one of the better values of any tech stock and the company looks poised to grow, with secular trends set to help drive the semiconductor firm forward.

Overview

Some investors turned their back on Micron and other companies with exposure in China based on fears that the ongoing trade dispute between the world’s two largest economies will be a drag on profits. China did account for roughly 50% of the company’s most recent full-year revenues.

With that said, China has concentrated its tariffs on agricultural products, manufacturing supplies, and other larger goods in response to the U.S. And of Micron’s $19.4 billion in net property, plant, and equipment, just $453 million is from China.

Some are also nervous that Micron has been the beneficiary of cyclical growth trends. In years and decades past, often dominated by PCs, there would have been more reason to think MU was due for a pullback. But today, the ubiquity of data storage and memory needs, for everything from cloud computing to AI, set Micron up for serious secular expansion. “We stand to benefit from the significant investments cloud service providers are making to build out their IT infrastructure,” CEO Sanjay Mehrotra said on Micron’s Q3 earnings call in late June.

“In summary, we continue to see strong market demand for memory and fast storage products due to the value these solutions provide in an economy where data—and fast access to that data—is increasingly important,” Micron’s chief executive continued. “Growing capabilities in the data center have enabled greater functionality at the edge, increasing users and creating more data and, in turn, driving opportunities for expanded, higher-value data services. We believe this virtuous cycle has driven the secular growth patterns we are currently seeing across nearly all of our markets and believe that it will persist into the foreseeable future.”

Price Movement

Shares of Micron have slipped roughly 1% during the last month. Still, MU stock has soared 270% over the last two years. This climb crushes Amazon’s (AMZN - Free Report) 145% and its industry’s 72%, which includes the likes of Intel (INTC - Free Report) , Advanced Micro Devices (AMD - Free Report) , and Texas Instruments (TXN - Free Report) . Micron stock is also up nearly 90% over the last 12 months but has experienced some rather large turbulence since the start of 2018. 

 

 

Valuation

At $53.39 per share, Micron stock closed over $10 below its 52-week high of $64.66 on Wednesday.Therefore, MU stock is less expensive than it has been over the last year based on price alone. Micron is also currently trading at 4.8X forward 12-month Zacks Consensus EPS estimates, which represents a significant discount compared to its industry’s 11.1X average, the S&P’s 17.4X, and blows away fellow chip power Nvidia’s (NVDA - Free Report) 35.8X.

MU stock has traded as high as 6.8X over the last year, with a one-year median of 5.4X. Micron is trading above its year-long low of 4.1X, but MU still offers insane value and looks rather cheap compared to the semiconductor industry as a whole.

Outlook

Micron’s fiscal Q4 revenues are projected to surge nearly 34% to hit $8.22 billion, based on our current Zacks Consensus Estimate. Meanwhile, the company’s full-year revenues are projected to climb 48% to reach $30.13 billion.

The firm’s adjusted quarterly earnings are projected to soar over 63% to touch $3.30 per share, while its  full-year earnings are expected to skyrocket 136%.

MU has also earned six upward earnings estimate revisions for its current quarter, against zero downward changes over the last 60 days. More importantly, Micron has received eight revisions for the full-year during this same timeframe, with 100% agreement to the upside—and seven for fiscal 2019.

Micron is currently a Zacks Rank #1 (Strong Buy) and rocks an “A” grade for Value and a “B” for Growth in our Style Scores system.

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