Memory-chip maker Micron Technology (MU) has seen its shares rise on signs of an improving business climate. After its recent surge, some investors might be wondering: Is Micron stock a buy right now?
The memory-chip market hit the skids in the second half of 2018 when sales of smartphones, personal computers, servers and other gear slowed. Memory-chip sales have improved lately and inventories have moderated, but the sector isn’t out of the woods yet.
Boise, Idaho-based Micron makes two main types of memory chips: DRAM and Nand. Dynamic random-access memory, or DRAM, accounted for 72% of Micron’s revenue in its fiscal fourth quarter. Nand flash memory accounted for 25% of its revenue during the period.
DRAM chips act as the main memory in PCs, smartphones and other devices, working closely with central processing units. Nand flash provides longer-term data storage.
In DRAM chips, MU stock competes with South Korea’s Samsung Electronics and SK Hynix.
In Nand flash chips, Micron competes with Samsung, Toshiba, Western Digital (WDC), SK Hynix and Intel (INTC). On Oct. 19, Intel announced a deal to sell its Nand memory chip business to SK Hynix for $9 billion.
MU Stock Fundamental Analysis
On Sept. 29, Micron beat Wall Street’s targets for its fiscal fourth quarter, but its outlook was light. MU stock dropped 7.4% on the news.
Micron earned an adjusted $1.08 a share on sales of $6.06 billion in the quarter ended Sept. 3. Analysts expected Micron earnings of 99 cents a share on sales of $5.89 billion. On a year-over-year basis, Micron earnings jumped 93% while sales rose 24%.
It was Micron’s second consecutive quarter of sales growth on a year-over-year basis, after five straight down quarters. And Micron returned to earnings growth after six down quarters.
For the current quarter, Micron expects to earn an adjusted 47 cents a share on sales of $5.2 billion. That’s based on the midpoint of its guidance. Wall Street had predicted Micron earnings of 69 cents a share on sales of $5.31 billion in the company’s fiscal first quarter. In the year-earlier period, Micron earnings were 48 cents a share on sales of $5.14 billion.
On a conference call with analysts, Chief Executive Sanjay Mehrotra said the company’s short-term outlook had weakened. He cited the economic impact of the Covid-19 pandemic, which has led to soft enterprise information technology spending.
Micron Shipping 5th Generation 3D Nand Chips
On Nov. 9, Micron announced it had started volume shipments of the world’s first 176-layer 3D Nand flash memory chips. The product achieves “unprecedented, industry-pioneering density and performance,” the company said.
“Micron’s 176-layer Nand sets a new bar for the industry, with a layer count that is almost 40% higher than our nearest competitor’s,” Scott DeBoer, executive vice president of technology and products at Micron, said in a news release.
Customers are deploying the fifth-generation of 3D Nand chips in applications such as 5G wireless, cloud computing and artificial intelligence.
Micron Stock Technical Analysis
Micron stock has an IBD Relative Strength Rating of 82 out of a possible 99, according to the IBD Stock Checkup tool. That means it has outperformed 82% of stocks over the past 12 months. The best growth stocks typically have RS Ratings of at least 80.
MU stock has an IBD Composite Rating of 92 out of 99. The best growth stocks have a Composite Rating of 90 or better. IBD’s Composite Rating combines five separate proprietary ratings into one easy-to-use rating.
Micron stock has an IBD Accumulation/Distribution Rating of A-, indicating institutional buying of MU stock.
Is MU Stock A Buy Right Now?
Micron stock is not a buy right now. It is trading well above the 5% chase zone of its recent breakout, according to IBD trading guidelines. In fact, it is trading above the 20%-to-25% profit-taking zone from its breakout.
MU stock ended the regular session on Dec. 21 at 71.47.
Micron ranks first out of nine stocks in IBD’s Computer-Data Storage industry group. But the group ranks No. 100 out of 197 industry groups tracked by IBD.
Growth stock investors should focus on the leading stocks in the top 40 industry groups.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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