Home Most Popular The Micron Saga: A Rollercoaster Ride Amidst AI Tailwinds and Market Volatility

The Micron Saga: A Rollercoaster Ride Amidst AI Tailwinds and Market Volatility

0

Micron’s Upcoming Q2 2024 Results: Riding High on AI Demand

Micron Technology (NASDAQ: MU) is gearing up to release its Q2 2024 results in March, with expectations running high due to increased pricing for DRAM memory and a surge in demand for High Bandwidth Memory used in AI applications. The company anticipates revenues between $5.1 to $5.5 billion, a substantial 42% rise from the previous year, with a projected adjusted net loss of $0.28 per share. What pivotal trends are poised to propel Micron’s earnings this quarter?

Memory prices are on an upward trajectory, fueled by various factors. Major players like Micron and Samsung have scaled back memory capacity investments, bolstering prices. In addition, the memory market is witnessing increased demand from smartphone OEMs replenishing memory inventory. The PC market is also rebounding, with projected shipments nearing 267 million in 2024. Furthermore, the emergence of generative AI tools such as ChatGPT is expected to drive up memory demand, particularly high-bandwidth memory (HBM) used in training expansive language models quickly. Micron, although not traditionally a leader in this space, recently unveiled specifications for its latest HBM3 second-generation memory, outpacing competitors and slated for early 2024 shipments. Margin-wise, Micron’s gross margins are forecasted to rebound modestly, with Q2 margins set between 11.5% to 14.5%, a leap from Q1’s 1% and Q4’s -9%.

The Stock Rollercoaster: MU’s Performance Over the Years

MU stock’s performance has been a rollercoaster ride. In 2021, it saw returns of 24%, followed by a -46% slump in 2022, and a staggering 71% surge in 2023. Comparatively, the S&P 500 witnessed 27% gains in 2021, a -19% dip in 2022, and a 24% rise in 2023. Resulting in MU underperforming the S&P in 2021 and 2022, beating the S&P 500 consistently has proven taxing for many, including stalwarts like MSFT, AAPL, NVDA, GOOG, TSLA, and AMZN. In contrast, the Trefis High-Quality (HQ) Portfolio, comprising 30 stocks, remarkably outshone the S&P 500 annually during the same timeframe. As economic uncertainties loom, can MU replicate its previous underperformance, or is a significant climb on the horizon?

Challenges Looming: Micron’s Road Ahead

Despite its potential, Micron faces challenges. Last year, the Chinese government prohibited the use of Micron products in critical infrastructure applications due to national security concerns, projecting a low to high single-digit revenue hit. Global economic uncertainties, coupled with high interest rates and persistent inflation, may dampen consumer electronics sales. However, the memory market’s overall recovery and the projected AI-driven demand upsurge could counterbalance these headwinds in the medium term. With a $74 price estimate for Micron stock, currently trailing by about 20% from the present market price, a reassessment will follow post-earnings. For an in-depth analysis of Micron’s valuation, explore “Micron’s Valuation: Expensive or Cheap.”

Returns Mar 2024
MTD [1]
2024
YTD [1]
2017-24
Total [2]
MU Return 5% 12% 336%
S&P 500 Return 0% 7% 128%
Trefis Reinforced Value Portfolio 0% 5% 643%

[1] Returns as of 3/6/2024
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market-Beating Portfolios. See all Trefis Price Estimates.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.