tiprankstipranks
Micron Mighty in Memory and Storage Industry
Stock Analysis & Ideas

Micron Mighty in Memory and Storage Industry

Micron Technology (MU) is a global memory and storage technology company that designs, manufactures, and sells its products. It operates in four business segments: Compute and Networking, Mobile, Storage, and Embedded. 

The main value for MU comes from the high demand for its memory and storage chips and other products. These products are particularly valuable, and increasingly in demand, as our economy transitions into the age of data centers, autonomous technologies, artificial intelligence, and internet of things.

As a leader in its field (number three in market share for memory and storage shipments after Samsung and SK Hynix), MU benefits from economies of scale and a considerable network of regular clients that give it high priority for business. This – combined with its strong balance sheet – enables it to weather the cyclical nature of its industry well and maximize profitability through cycles.

MU reported very strong results in its fiscal third quarter, including achieving the largest sequential earnings-per-share improvement in its history while setting multiple revenue records. Thanks to the explosion of artificial intelligence and 5G technologies, along with the global economic reopening and recovery, the memory and storage industry is booming, driving up MU’s results with it. (See MU stock analysis on TipRanks)

Valuation Metrics

While the company has a lot going for it at the moment, its valuation appears to be pretty reasonable. MU’s Enterprise Value to forward EBITDA stands at 4.43x, which is right in line with its 10-year average of 4.32x.

Another positive is that the balance sheet is in excellent shape. MU has a whopping $8.35 billion in cash on hand along with a very conservative 3.4x Current Ratio, 2.6x Quick Ratio, and is net cash positive. Clearly, there is little risk here of the company experiencing financial distress anytime soon and MU is well positioned to not only weather, but potentially respond opportunistically to, a sectoral downturn.

Wall Street’s Take

From Wall Street analysts, Micron earns a Strong Buy consensus rating based on 17 Buy ratings, 5 Hold ratings, and 0 Sell ratings in the past 3 months. Additionally, the average Micron price target of $116 puts the upside potential at 43.5%.

Summary and Conclusions

Micron has a large position in its industry, giving it some competitive advantages. Furthermore, its industry is booming right now, thanks to both short-term and long-term tailwinds, enabling it to put up record revenue numbers and strong earnings-per-share growth. On top of that, the balance sheet is extremely strong and MU is well positioned to buy back shares and/or growth via acquisition, if market conditions were to provide an attractive opportunity to do so.

Last, but not least, the valuation appears to be pretty fair relative to long-term averages, and Wall Street analysts are overwhelmingly bullish on the stock’s upside potential. As a result, MU looks like it could be a good buy, though investors should keep in mind that MU does face significant competition and also operates in a cyclical industry.

Disclosure: On the date of publication, Samuel Smith had no position in any of the companies discussed in this article.

DisclaimerThe information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.

Trending

Name
Price
Price Change
S&P 500
Dow Jones
Nasdaq 100
Bitcoin

Popular Articles