Nvidia Just Gave Micron Stock a Big Boost. Should You Buy It Now?
Micron Technology (MU), valued at a market capitalization of $105 billion, is among the largest semiconductor stocks in the world. The chip stock has gained investor attention in recent trading sessions after Citi analysts highlighted positive catalysts tied to Nvidia's (NVDA) next-generation GPU plans.
According to Citi analyst Christopher Danely, Nvidia's upcoming Rubin chip will integrate 288GB of HBM4 DRAM, representing a 50% increase over the current Blackwell architecture. This in turn implies that Nvidia will have a greater demand for DRAM solutions from Micron.
This memory expansion should benefit Micron, which already maintains impressive gross margins of 70% on its high-bandwidth memory products. Micron's HBM4 technology is a significant advancement in high-performance memory. The chip, scheduled for mass production in 2026, offers 50% better performance than its predecessor.
Despite competition from SK Hynix and Samsung, Micron aims to capture market share in the rapidly expanding AI chip segment, where memory bandwidth is increasingly critical.
Micron stock has returned close to 250% to shareholders in the last 10 years. Despite its outsized gains, the tech stock is down roughly 40% from its 52-week high, allowing you to buy the dip.
Is Micron Stock a Good Buy Right Now?
Micron Technology shares surged after the memory chipmaker reported stronger-than-expected fiscal Q2 (ending in February) results. It also raised its outlook for fiscal 2025 due to robust demand for high-bandwidth memory (HBM) used in artificial intelligence applications.
In Q2, Micron reported adjusted earnings of $1.56 per share on revenue of $8.05 billion, beating consensus estimates of $1.43 per share on $7.89 billion, respectively. Revenue increased 38% from the year-ago period, while net income nearly doubled to $1.58 billion.
Micron's performance was fueled by record data center DRAM revenue, with HBM revenue growing more than 50% sequentially to exceed $1 billion for the first time. Its fiscal Q2 DRAM revenue reached $6.1 billion, accounting for 76% of total revenue and increasing 47% year-over-year.
'Micron is in the best competitive position in our history, and we are achieving share gains across high-margin product categories in our industry,' said CEO Sanjay Mehrotra on the earnings call. 'Our strong product momentum has enabled us to build deeper customer relationships, and Micron's industry-leading products are now more firmly entrenched in our customers' high-value product roadmaps.'
For the current fiscal third quarter, Micron forecasts revenue of approximately $8.8 billion, above estimates of $8.5 billion. It expects adjusted earnings of $1.57 per share, ahead of Wall Street's consensus of $1.47 per share.
Micron has raised its forecast for the 2025 HBM market to over $35 billion and expects to reach HBM market share in line with its overall DRAM supply share by the end of calendar 2025. Micron's HBM3E 12-high product, which delivers 50% higher memory capacity with 20% lower power consumption than competing products, is now in volume production.
Micron is also making significant investments to expand its manufacturing capabilities, including breaking ground on an HBM advanced packaging facility in Singapore and progressing on its new DRAM fab in Idaho, which received its first CHIPS Act funding disbursement during the quarter.
Is MU Stock Undervalued?
Analysts tracking Micron stock expect its revenue to rise from $25.1 billion in fiscal 2024 to $45 billion in 2026. Comparatively, adjusted earnings per share are forecast to rise from $1.30 in 2024 to $11.08 in 2026. The company's free cash flow is also projected to improve from $121 million in 2024 to $5.22 billion in 2026.
So, priced at 8.8x forward earnings and 21x forward free cash flow, the tech stock is relatively cheap. Out of the 30 analysts covering Micron stock, 25 recommend 'Strong Buy,' two recommend 'Moderate Buy,' two recommend 'Hold,' and one recommends 'Strong Sell.' The average target price for MU stock is $130.57, indicating an upside potential of almost 40% from current levels.
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