Surprisingly, Micron technology(NASDAQ:MU) The stock has had a disappointing stock market performance in 2024. It has posted gains of just 20%, despite strong results in recent quarters that point to exceptional revenue and profit growth for the company.
Shares of the memory specialist are down 27% since hitting a 52-week high in mid-June. However, it won’t be surprising to see the stock’s fortunes change after Micron reports its first quarter fiscal 2025 results on December 18.
Let’s see why this may be the case.
Micron Technology is known for manufacturing memory chips for computing and storage. This market is historically cyclical in naturebased on the demand for personal computers (PCs) and smartphones. That explains why the global memory market plunged nearly 39% last year, according to Gartner estimates, due to a 4.4% drop in shipments of PCs, smartphones and tablets.
The decline in device shipments was more pronounced in 2022, with a decline of 11.9%. Unsurprisingly, Micron’s financial performance in 2022 and 2023 suffered as a result.
However, the memory industry has seen a turnaround this year. It is driven by catalysts such as artificial intelligence (AI) which lead to increased memory consumption in several areas, such as data centers, smartphones, and PCs. For example, the use of high-bandwidth memory (HBM) in AI chips has increased at an incredible rate, as Nvidia have integrated this type of memory to make their AI accelerators more powerful.
Nvidia’s latest Blackwell B200 GPU is equipped with 192 gigabytes (GB) from HBM, which is a big improvement over the previous generation H100’s 96 GB and the H200’s 144 GB. This factor could help Micron achieve better results than expected. Indeed, when Nvidia reported its latest quarterly results last month, management emphasized that Blackwell’s production ramp-up was occurring at a faster pace than expected.
Nvidia emphasizes that it is on track to “surpass our previous Blackwell revenue estimate by several billion dollars as our supply visibility continues to increase.” This is good news for Micron, since the chipmaker has already supplied its HBM chips to Nvidia. Blackwell’s stronger demand could help it exceed market expectations. Catalysts like HBM also explain why the global memory market is expected to generate $163 billion in revenue this year, a significant increase from last year’s $92 billion.
Micron also seems well-positioned to provide impressive guidance. Indeed, the size of the memory market is expected to reach $204 billion in 2025. HBM is of course expected to play a central role in the growth of this market. Micron expects this specific type of chip to generate $25 billion in revenue next year, up from $4 billion in 2023.
At the same time, new catalysts such as the new PC refresh cycle and the growing smartphone market could provide an additional boost to Micron. IDC estimates that the global PC market could grow 4.3% in 2025, following a flat performance this year. At the same time, global smartphone sales are expected to grow less than 10% next year.
The combination of these factors should ensure that the memory market remains healthy in 2025. This should be enough to help Micron maintain the impressive growth momentum it has gained over the past few quarters.
Analysts expect Micron’s revenue to jump 84% year over year to $8.71 billion in the first quarter of fiscal 2025. It is expected to post a profit of $1.77 per share, compared to a loss of $0.95 per share in the same quarter last year. These numbers are well within Micron’s guidance range. We’ve already seen that stronger demand from companies like Nvidia could help Micron beat consensus expectations, which could send the stock soaring after its quarterly report.
At the same time, Micron is expected to report exceptional revenue growth of 52% in fiscal 2025, to $38 billion, while earnings are expected to reach $8.78 per share, up from 1 .30 dollars per share for the previous fiscal year.
Finally, Micron’s incredibly cheap valuation means investors are currently getting an incredible deal on the stock. The chipmaker trades at just 12 times forward earnings, and Yahoo! Finance points out that its price-to-earnings-to-growth ratio (PEG ratio), based on its estimated five-year earnings growth rate, is just 0.17.
A PEG ratio below 1 means a stock is undervalued relative to the growth it is expected to generate. This makes Micron a top growth stock that investors can consider buying, as it looks poised to skyrocket this month, as well as next year.
Before buying Micron Technology stock, consider this:
THE Motley Fool Stock Advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Micron Technology was not one of them. The 10 stocks selected could produce monster returns in the years to come.
Consider when Nvidia made this list on April 15, 2005…if you had invested $1,000 at the time of our recommendation, you would have $822,755!*
Equity Advisor provides investors with an easy-to-follow plan for success, including portfolio building advice, regular analyst updates, and two new stock picks each month. THEEquity Advisorthe service has more than quadrupled the return of the S&P 500 since 2002*.
