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Should You Buy Micron (MU) Stock On the Dip Ahead of Earnings?
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Shares of Micron (MU - Free Report) have plummeted over 40% in the last six months along with the broader semiconductor market. Now, the question is should investors consider buying beaten down Micron on the dip ahead of its upcoming earnings release Tuesday?
Overview
Micron was flying high not too long ago. Then investors began to worry about how the escalating trade war between the U.S. and China would impact the firm. Maybe more importantly, fears about the historically cyclical nature of the chip industry started to pop up, along with DRAM and NAND pricing headwinds.
In the long-run, demand for memory and storage solutions will almost certainly continue to trend upward. But short-term oversupply factors can hurt companies like Micron, which is what many analysts say is happening at the moment. Still, despite the recent downturn, Micron’s fiscal fourth quarter revenues surged 38% to reach $8.44 billion. In fact, the company set revenue records across all its major markets. Plus, its full-year revenues soared 50% to $30.39 billion.
On top of that, Micron in August announced its plans to invest $3 billion in a Virginia plant by 2030 in order to increase memory production. Plus, 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
As we mentioned, the chip business can be very cyclical, as MU’s price chart below helps show us. The company’s stock price is still up roughly 160% over the last three years, which includes its 40% downturn in the past six months. Micron is also not alone, as the broader semiconductor market has tumbled 21% during this same stretch—Nvidia (NVDA - Free Report) has tumbled 44%
MU saw its stock price dip 2.30% to $35.17 a share through morning trading Thursday. This marked a 45% downturn from its 52-week high of $64.66 per share.
Outlook & Earnings Trends
Looking ahead, our current Zacks Consensus Estimate is calling for Micron’s fiscal Q1 revenues to jump by 17.7% to reach $8.01 billion. Meanwhile, Micron’s adjusted quarterly earnings are projected to surge 19.6% to touch $2.93 per share. We should note that both of these top and bottom line estimates would mark a slowdown from Micron’s growth throughout much of the last year.
Micron’s Q1 earnings estimates have been mixed recently. But, the company’s fiscal 2019 and 2020 estimates have trended completely in the wrong direction during this same 60-day stretch.
Bottom Line
Micron is currently a Zacks Rank #4 (Sell) based, in large part, on its longer-term negative earnings trends. The company does sport a “B” grade for Value and an “A” for Growth in our Style Score system. Plus, MU is currently trading at 4.1X forward 12-month Zacks Consensus EPS estimates, which represents a massive discount compared to its industry’s 11.9X average—AMD (AMD - Free Report) is trading at 37.5X.
With all that said, it seems like investors might want to avoid Micron until the stock shows at least some ability to bounce back following its massive decline. The first chance will likely come when Micron reports its Q1 financial results, which are currently scheduled to be released after the market closes on Tuesday, December 18.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Should You Buy Micron (MU) Stock On the Dip Ahead of Earnings?
Shares of Micron (MU - Free Report) have plummeted over 40% in the last six months along with the broader semiconductor market. Now, the question is should investors consider buying beaten down Micron on the dip ahead of its upcoming earnings release Tuesday?
Overview
Micron was flying high not too long ago. Then investors began to worry about how the escalating trade war between the U.S. and China would impact the firm. Maybe more importantly, fears about the historically cyclical nature of the chip industry started to pop up, along with DRAM and NAND pricing headwinds.
In the long-run, demand for memory and storage solutions will almost certainly continue to trend upward. But short-term oversupply factors can hurt companies like Micron, which is what many analysts say is happening at the moment. Still, despite the recent downturn, Micron’s fiscal fourth quarter revenues surged 38% to reach $8.44 billion. In fact, the company set revenue records across all its major markets. Plus, its full-year revenues soared 50% to $30.39 billion.
On top of that, Micron in August announced its plans to invest $3 billion in a Virginia plant by 2030 in order to increase memory production. Plus, 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
As we mentioned, the chip business can be very cyclical, as MU’s price chart below helps show us. The company’s stock price is still up roughly 160% over the last three years, which includes its 40% downturn in the past six months. Micron is also not alone, as the broader semiconductor market has tumbled 21% during this same stretch—Nvidia (NVDA - Free Report) has tumbled 44%
MU saw its stock price dip 2.30% to $35.17 a share through morning trading Thursday. This marked a 45% downturn from its 52-week high of $64.66 per share.
Outlook & Earnings Trends
Looking ahead, our current Zacks Consensus Estimate is calling for Micron’s fiscal Q1 revenues to jump by 17.7% to reach $8.01 billion. Meanwhile, Micron’s adjusted quarterly earnings are projected to surge 19.6% to touch $2.93 per share. We should note that both of these top and bottom line estimates would mark a slowdown from Micron’s growth throughout much of the last year.
Micron’s Q1 earnings estimates have been mixed recently. But, the company’s fiscal 2019 and 2020 estimates have trended completely in the wrong direction during this same 60-day stretch.
Bottom Line
Micron is currently a Zacks Rank #4 (Sell) based, in large part, on its longer-term negative earnings trends. The company does sport a “B” grade for Value and an “A” for Growth in our Style Score system. Plus, MU is currently trading at 4.1X forward 12-month Zacks Consensus EPS estimates, which represents a massive discount compared to its industry’s 11.9X average—AMD (AMD - Free Report) is trading at 37.5X.
With all that said, it seems like investors might want to avoid Micron until the stock shows at least some ability to bounce back following its massive decline. The first chance will likely come when Micron reports its Q1 financial results, which are currently scheduled to be released after the market closes on Tuesday, December 18.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>