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Time to Buy Micron (MU) Stock on The Dip?

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Micron (MU - Free Report) saw its stock price plummet over 3.5% Tuesday after RBC Capital Markets lowered its price target for the memory-chip maker. MU's slip is part of a nearly 30% decline over the last three months as investors worry that the trade war, among other things, might harm Micron.

RBC Capital

RBC Capital Markets analyst Amit Daryanani lowered his price target for MU stock from $83 per share to $70 per share. Investors should note that shares of Micron closed at $44.90 on Monday, which means even the lowered price target represents roughly 56% upside.

Daryanani pointed to “memory cycle headwinds” as a major reason for his subdued price target. However, it is worth noting that the RBC analyst maintained his “outperform” rating for MU stock. Meanwhile, the analyst downgraded shares of Western Digital (WDC - Free Report) from “outperform” to “perform.”


In July, a Chinese court ruled in favor of Taiwanese firm United Microelectronics’ patent infringement lawsuits against Micron. But the firm’s leadership assured investors that the impacted products make up roughly 1% of the company’s annualized revenues. Investors should be pleased to hear that Micron said at the time that it continues to expect its fiscal fourth quarter revenues to fall within its previously guided range of $8 billion to $8.4 billion.

Plus, Micron announced in late August it plans to invest a total of $3 billion at its Manassas, Virginia plant by 2030 in order to increase memory production. Maybe more importantly, Micron hopes to lift its overall capital expenditure into the low 30s as a percentage of revenue over the long haul to help it catch up to rivals’ spending as chips become smaller and often more expensive and complex to make.

Price Movement

Micron has seen its stock price surge over 153% in the last two years, which outpaces the S&P 500’s 34% and its industry’s 67% jump. However, investors will see that MU’s performance looks rather turbulent over the last year. The benefit here is that Micron stock, which closed regular trading Tuesday at $43.60 per share, is trading roughly $20 below its 52-week high of $64.66 per share.



Now let’s take a look at Micron’s current valuation picture. MU is trading at 4.3X forward 12-month Zacks Consensus EPS estimates, which represents a significant discount compared to its industry’s 11.1X average and the S&P’s 17.3X. Plus, Micron is trading far below Nvidia’s (NVDA - Free Report) 37.7X and AMD's (AMD - Free Report) 59X. Over the last year, MU has traded as high as 6.8X, with a one-year median of 5.4X. And before investors think Micron is somehow a value trap let’s take a look at its current growth projections.



Micron’s fiscal Q4 revenues are projected to surge roughly 34% to hit $8.22 billion, based on our current Zacks Consensus Estimate. Meanwhile, the company’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%.

Micron is currently a Zacks Rank #3 (Hold) and sports “A” grades for both Value and Growth in our Style Scores system. With all that said, now might not be a bad time to think about buying Micron stock as it is set to report its fiscal fourth quarter financial results on September 20.

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