Prognosis: The Shares of This Artificial Intelligence (AI) Semiconductor Company are Prepared to Skyrocket Post-December 18th
Prognosis: The Shares of This Artificial Intelligence (AI) Semiconductor Company are Prepared to Skyrocket Post-December 18th
It's quite a letdown that Micron Technology's (MU 2.91%) shares didn't perform as expected on the stock market in 2024, only racking up gains of 20%. Despite its notable performance in recent quarters, hinting at a promising future for the company's revenue and earnings, the shares have dipped by 27% since reaching their 52-week high in mid-June.
However, it wouldn't be surprising if the stock's fortunes take a turn for the better post Micron's release of its fiscal 2025 first-quarter results on Dec. 18.
Micron's forthcoming earnings could surpass predictions
Micron Technology's reputation for manufacturing memory chips for both computing and storage sectors is well-known. Historically, this market is known to fluctuate, primarily influenced by the demand for personal computers (PCs) and smartphones. Consequently, the global memory market had taken a hit, according to Gartner, declining by a whopping 39% last year due to a 4.4% decrease in PC, smartphone, and tablet shipments.
In 2022, the memory industry witnessing a downturn was more pronounced, with a decline of 11.9% in device shipments. Naturally, Micron's financial performance in 2022 and 2023 witnessed a similar downward trend.
However, the tide has turned for the memory industry in 2024. The surge is attributed to factors such as artificial intelligence (AI) that is boosting memory consumption across various sectors, including data centers, smartphones, and PCs. The increasing usage of high-bandwidth memory (HBM) in AI chips is a prime example. Companies like Nvidia have significantly increased their integration of HBM in their AI accelerators to enhance their power.
Nvidia's latest Blackwell B200 GPU, equipped with 192 gigabytes (GB) of HBM, is a substantial improvement over previous-generation GPUs starring 96 GB in the H100 and 144 GB in the H200. This development could help Micron deliver results exceeding expectations. Notably, when Nvidia announced its latest quarterly results last month, its management indicated that the Blackwell production ramp-up was progressing at a faster-than-anticipated pace.
Nvidia's management mentioned that it is "on track to exceed our previous Blackwell revenue estimate of several billion dollars as our visibility into supply continues to increase." This is advantageous for Micron, as it is already a significant supplier of HBM chips to Nvidia. The stronger demand for Blackwell could potentially enable Micron to overperform the market's expectations. Factors such as HBM explain why experts predict a significant rise in the global memory market's revenue to $163 billion this year, a significant increase from $92 billion last year.
Micron appears well-positioned to provide encouraging guidance. This is due to the anticipated growth in the memory market's size, expected to expand to $204 billion in 2025. Given that HBM plays a crucial role in this market's growth, Micron anticipates this particular type of chip to generate $25 billion in revenue in 2024, significantly more than the $4 billion it earned in 2023.
Alongside these factors, new catalysts like the upcoming PC refresh cycle and the growth in the smartphone market could provide Micron an extra boost. IDC predicts that the global PC market could display 4.3% growth in 2025, following a stagnant performance this year. In contrast, global smartphone sales are expected to rebound with low single-digit growth in 2025.
The combination of these elements should ensure the memory market will remain healthy in 2025. This health should be enough to support Micron in sustaining the impressive growth it has gained in recent quarters.
Stellar growth and appealing valuation make acquiring the stock a no-brainer
Experts estimate Micron's revenue to skyrocket 84% year-over-year to $8.71 billion in the first quarter of fiscal 2025. It is forecasted to record a profit of $1.77 per share, contrasted with a loss of $0.95 per share in the same quarter last year. These figures are well within Micron's projected range. The stronger demand from companies like Nvidia could potentially allow Micron to surpass consensus expectations, propelling the stock to new heights following its quarterly report.
Simultaneously, Micron is predicted to report an outstanding 52% revenue growth in fiscal 2025, reaching $38 billion, while earnings are forecasted to jump to $8.78 per share compared to $1.30 per share in the previous fiscal year.
Lastly, Micron's budget-friendly valuation makes it a desirable investment option for investors. The company is being sold at a mere 12 times forward earnings, and Yahoo! Finance mentions that its price-earnings-to-growth ratio (PEG ratio) based on its five-year estimated earnings growth rate is just 0.17.
A PEG ratio under 1 suggests that a stock is undervalued in relation to the growth it is projected to deliver. This renders Micron an attractive growth stock that investors can consider buying, as it seems poised to continue its upward trajectory this month and beyond.
Given Micron's expected growth due to increased demand for HBM chips in AI and other sectors, it might be wise for investors interested in the finance sector to consider deploying their money into Micron Technology stocks, as the company's significant supply to Nvidia could potentially lead to exceeding market expectations.
The impressive revenue growth projected for Micron in the upcoming fiscal quarter and year, along with its budget-friendly valuation, make it an appealing growth stock prospect for investors looking to invest in the finance domain.