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by Sristi Suman Jayaswal, Barchart
As artificial intelligence (AI) adoption skyrockets, the demand for computing power and cloud storage surges, with AI-powered storage market revenue potentially reaching $282.9 billion by 2033, expanding at a 26.5% CAGR. Meanwhile, smartphones, PCs, and servers are integrating more dynamic random access memory (DRAM) to keep pace with AI’s demands. This year alone, DRAM in smartphones and notebooks is expected to rise 14% and 12%, respectively, while servers could see a 17.3% boost.
Micron Technology, Inc. (MU) is riding this growth wave with a booming bottom line and thriving in the high-bandwidth memory market, fueling AI’s relentless data hunger. However, with mixed earnings from mega-cap tech companies contributing to a widespread sell-off in the market lately, MU stock has now dropped over 40% from its June peak.
For investors who have been waiting for AI stocks to cool down from their recently stretched valuations, this dip in Micron stock could offer a prime opportunity for those looking to buy shares of a dividend-paying semiconductor stock with AI-driven growth potential.
Let’s take a closer look.
About Micron Technology Stock
Founded in 1978, Micron Technology, Inc. (MU) is a leading manufacturer of innovative memory and storage solutions, providing essential tech for industries like computing, networking, and mobile communications. With a market cap of $121.8 billion, this powerhouse crafts cutting-edge DRAM, NAND Flash, and SSDs, making essential components for today’s digital world.
Despite a steep pullback from their June highs, shares of Micron have surged 35.9% over the past 52 weeks, outperforming the S&P 500 Index's ($SPX) 18.5% returns and the iShares Semiconductor ETF’s (SOXX) 20.4% gains.
On July 23, Micron Technology paid its shareholders a quarterly dividend of $0.115 per share. The tech-hardware innovator offers an annualized dividend of $0.46 per share, resulting in a yield of 0.42%. Furthermore, it maintains a payout ratio of 28.87%, which provides room for growth initiatives and potential future dividend hikes.
Priced at 7.32 times sales, Micron Technology trades at a discount to many of its large-cap semiconductor peers.
Micron Technology’s Q3 Beats Wall Street Projections
Micron reported solid fiscal Q3 earnings results on June 26, smashing past Wall Street’s forecasts. Its total revenue rose 81.6% annually to $6.8 billion, fueled by strong demand for memory and storage products, especially in the AI sector. Its adjusted EPS climbed to $0.62 from a year-ago loss of $1.43 per share, also topping estimates.
Key to this success was Micron's focus on high-margin products like High Bandwidth Memory (HBM), which generated over $100 million in HBM3E revenue with strong margins. HBM's critical role in AI systems, offering better performance and lower power consumption, underscores Micron's market leadership. Additionally, the company's data center SSD revenue hit a record, doubling sequentially, reflecting robust AI-driven demand across DRAM and NAND.
Despite the solid Q3 report, shares of Micron Technology still dipped 7.1% on the news as investors reacted to in-line revenue guidance. The semiconductor company projected $7.6 billion in revenue, which failed to meet the high bar for growth that some anticipated. This overshadowed Micron’s forecast for positive free cash flow growth during Q4.
While the future looks promising, Micron faces challenges like tight memory supply and reliance on high-margin products like HBM, which carry their own risks if demand shifts.
Analysts tracking Micron Technology predict EPS of $0.58 in fiscal 2024, bouncing back from its 2023 loss, with the bottom line projected to surge to $8.75 in fiscal 2025.
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What Do Analysts Expect for Micron Technology Stock?
Amid recent volatility in semiconductor stocks, Bank of America’s Vivek Arya backed his “Buy” rating on Micron on July 29.
Analysts are upbeat about MU stock’s prospects, with a consensus “Strong Buy” rating overall. Among the 27 analysts covering the stock, 24 are highly bullish with a “Strong Buy,” two advise a “Moderate Buy,” and the one suggests a “Hold.”
The mean price target for MU is $164.26, indicating an upside potential of 77.2% from current levels. The Street-high target price is $225, via analyst Hans Mosesmann of Rosenblatt Securities.
On the date of publication, Sristi Suman Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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