Table Of Contents
Company profile – leading manufacturer of memory and semiconductor technologies
The last Micron Technology quarterly figures from August 2024
Key metrics for Micron Technology stocks from the HGI analysis
Micron Technology (ISIN: US5951121038) is a leading global manufacturer of memory and semiconductor technologies and plays a central role in the growing demand for data and storage solutions, particularly in areas such as data centres, mobile devices and the hot topic of artificial intelligence (AI).
Despite industry-specific challenges such as strong margin pressure and the strong cyclicality of the semiconductor market, current developments suggest that Micron Technology could benefit from a potential AI supercycle. The impressive revenue growth of 62 per cent in the last quarter could be an early indication of the company's hidden potential in this future market.
The share price has also reacted significantly in the recent past, as the price increase of almost 50 per cent in the last year shows. Over a ten-year period, it has even more than tripled. Despite price fluctuations, shareholders have been able to profit well.
Source: Stock price of Micron stock
But despite the great opportunities for growth, the share is still valued moderately with an expected PER of 12. However, the comparatively low valuation reflects the typical risks of the semiconductor industry, such as price fluctuations or the high investment requirements. The following Micron Technology share analysis should shed more light on whether the share can still be a buy.
The most important information in brief
Micron Technology's business model is based on the development, manufacture and sale of memory and semiconductor technologies, including DRAM and NAND flash memory. These memory products are used in data centres, mobile devices, the automotive industry, Internet of Things (IoT) applications and consumer electronics. These are areas that are growing in importance in today's technology era, particularly due to AI.
Micron Technology is aiming for a leading market position with a strong product portfolio and innovative storage solutions that meet the requirements of markets such as AI, 5G and cloud computing. Today, the company is the fifth largest memory manufacturer in the world. The industry is considered highly concentrated. The five largest players control almost the entire market. However, they have no pricing power, which may explain the strong fluctuations in sales and earnings.
Micron Technology divides its business into four main segments, each covering different markets and applications:
Source: Form 10-K 2024 Micron
Compute and Networking Business Unit (CNBU): This segment includes memory products and solutions sold to markets such as data centres, PCs, graphics systems and networking solutions. It thus serves key areas of IT infrastructure by providing high-performance and storage capacity for cloud computing, high-performance computing and network systems. Products such as DRAM and NAND are used here to meet the increasing demands for computing power and data storage in these markets. With annual sales of most recently $9.5 billion, this is by far the largest segment, accounting for almost 38 percent of sales.
Mobile Business Unit (MBU): The MBU focuses on memory products and storage solutions for smartphones and other mobile devices. These products are designed to meet the high storage capacity, energy efficiency and performance requirements of modern mobile devices. In this segment, Micron offers storage solutions that are optimised for the latest mobile technologies, such as 5G and mobile AI applications, to improve the user experience. In the last financial year 2024, the MBU segment generated $6.4 billion in revenue, which is around a quarter of total revenue.
Embedded Business Unit (EBU): This segment includes storage products and solutions used in so-called intelligent edge applications – particularly in the automotive industry and in embedded systems for consumers. Here, Micron provides storage solutions for critical applications, including advanced driver assistance systems (ADAS), industrial automation and connected consumer goods, which are becoming increasingly important in areas such as the Internet of Things (IoT). This business unit accounts for around 18 percent of total revenues.
Storage Business Unit (SBU): The SBU specialises in solid-state drives (SSDs) and component-level storage solutions sold to data centres, PCs and the consumer market. The products are designed to meet the requirements for fast, reliable and durable storage solutions for a variety of applications, from high-performance servers in data centres to end-user devices such as laptops and desktops. In the past fiscal year, the segment generated sales of almost $4.6 billion.
Source: Form 10-K 2024 Micron
The first thing that stands out is the good diversification of the customer structure. No single customer accounts for more than 10 per cent of sales. However, the geographical distribution of sales shows that Asian countries dominate – but this is not unusual for semiconductor companies. Europe is not important for Micron Technology. However, the USA is important, accounting for around half of sales.
The semiconductor and memory industry in which Micron Technology operates is an extremely competitive and cyclical sector, but one that is also strongly characterised by technological progress and continuous innovation. As demand for ever more powerful, energy-efficient and cost-effective storage solutions continues to grow, these companies must continuously invest in research and development to remain competitive. New technologies such as 3D NAND or advanced DRAM architectures play a crucial role in this, as they make it possible to increase storage density and reduce production costs without sacrificing performance.
In addition, the industry is extremely cyclical and characterised by strong price fluctuations. It is a classic volume market in which price is a crucial component. Supply and demand can change significantly within short periods of time. An oversupply of memory chips regularly leads to a price decline, while increased demand – for example, due to new technological developments such as 5G or artificial intelligence – causes prices to rise. Accordingly, manufacturers' revenues fluctuate sharply. Probably the biggest challenge in this context is to manage production capacities flexibly while keeping costs low so as not to slip into the red during periods of weakness. The regularly high investment costs have a particularly adverse effect here.
Unfortunately, the industry is characterised by a high capital intensity. This is due to the manufacture of semiconductors and memory chips, which requires expensive factories – so-called fabs. These up-front investments, which usually run into the billions, can only be afforded by a few companies. As a result, many competitors have left the market in the past. Micron Technology is one of the few companies that have survived.
Another feature of the industry is its global interconnectedness and the associated geopolitical risks. Semiconductor production is highly globalised, with complex supply chains spanning multiple continents. Production and distribution are therefore vulnerable to geopolitical tensions, particularly between the US and China. Trade policy decisions such as tariffs or export controls can restrict access to important markets or significantly affect the cost structure. Micron Technology already felt the effects of this last year when the Chinese cyber security authority banned the use of Micron chips in national infrastructure.
Despite these challenges, the sector offers long-term growth opportunities. The increasing importance of cloud computing, artificial intelligence, autonomous driving and 5G technologies is leading to rising demand for storage solutions – a supercycle that is currently overriding the law of cyclicality. Companies that are able to deliver products for these growth markets can benefit from this trend. The growth rates of the leading players speak for themselves.
Source: StocksGuide Charts
Although the industry is already very concentrated due to the characteristics described above, there is still fierce competition. Micron Technology's main competitors are primarily global technology companies such as Samsung Electronics and SK Hynix, which also specialise in storage solutions. Samsung, for example, is the market leader in the DRAM and NAND segment, followed by SK Hynix.
Micron Technology, however, is one of the few companies that develops and produces both DRAM and NAND, which puts it in direct competition with these Asian giants. Micron is also one of the few companies that is vertically integrated in both DRAM and NAND production, which allows for complete control over the production chain, but also carries significant financial risk. Other competitors in the NAND sector are Western Digital and Kioxia (formerly Toshiba).
In the fourth quarter of fiscal year 2024, which ended on 29 August, Micron Technology generated revenues of $7.75 billion. This represents an increase of 10.8 per cent over the $6.81 billion of the previous quarter and an impressive increase of 93.2 per cent over the $4.01 billion of the previous year.
Source: Fourth-Quarter 2024 Financial Results from Micron Technology
GAAP net income was explosive, coming in at $887 million, or $0.79 per diluted share, up 162 per cent. On a non-GAAP basis, net income was $1.34 billion, or $1.18 per diluted share. Particularly noteworthy, however, is the strong operating cash flow of $3.41 billion, a significant increase from the $2.48 billion of the previous quarter and $249 million in the year-ago period.
Source: 2024 annual figures from Micron
In fiscal year 2024 as a whole, Micron generated revenue of $25.1 billion, compared to $15.5 billion in the previous year. Growth across all four quarters of 62 per cent is even lower than in the previous quarter alone, indicating sustained high momentum. GAAP net income ended up at $778 million. It was visibly lower than the non-GAAP result of $1.47 billion. Compared to the previous year, however, it represents a loose doubling.
CEO Sanjay Mehrotra emphasised that strong demand in the area of artificial intelligence contributed to a noticeable increase in the company's own DRAM products for data centres. But NAND revenues, particularly from SSDs in the data centre, also reached a record of over $1 billion in the fourth quarter of 2024. Micron remained optimistic about the coming fiscal year 2025 and forecast record revenues and improved profitability.
As previously mentioned, Micron Technology has issued an optimistic forecast for the first quarter of fiscal year 2025. Specifically, the company expects sales of approximately $8.7 billion, with a range of $200 million. Compared to the first quarter of 2024, when sales of just USD 4.7 billion were generated, this represents strong growth of 84 per cent.
Source: press release on quarterly figures Q4/2024
Margins should be significantly better than in the same quarter of the previous year. Micon expects a gross margin of 38.5 per cent with a fluctuation range of 1.0 per cent. In the previous year, at -0.7 per cent, this was still clearly negative. Operating costs are expected to be only slightly higher than in the same quarter of the previous year, at $1.2 billion ($1.1 billion).
Micron Technology expects diluted earnings per share of $1.54 under GAAP and $1.74 on an adjusted basis. No guidance was given for the full year 2025. However, analysts expect growth to continue for several more years, albeit at a lower rate.
Source: Revenue and margin forecast from 2025 to 2027
They see an optimistic revenue forecast for 2025. A total of 32 analysts have provided an estimate, with the average revenue forecast for the full year 2025 at just under $38 billion. This represents an increase of almost 52 per cent compared to the revenue of the last twelve months, which was just over $25 billion.
However, the forecasts differ: the highest estimate is over 41 billion US dollars (growth of 64 per cent), the lowest is almost 35 billion US dollars (growth: 38 per cent). The analysts' uncertainty is not without reason. After all, it is a very cyclical business.
However, most analysts agree on future growth: high-level growth is still possible in the years to come. For example, revenues of almost 50 billion US dollars are forecast for 2026, which corresponds to a weaker but still high growth rate of 20 per cent compared to 2025. In 2027, sales of $46 billion are then expected, which represents an almost stable increase of just 0.4 per cent. The forecasts ultimately make it clear that analysts expect strong growth in the coming years, particularly in the areas of artificial intelligence and data storage. Both could be seen as driving forces behind the demand for Micron's products.
The High Growth Investing strategy, or HGI strategy for short, values fast-growing companies based on factors such as sales growth, margins, debt and other key figures, even if the company may not yet be fully profitable. The HGI score of Micron shares recently showed a high value in this context – 14 out of a possible 18 points, to be precise.
Source: HGI score of Micron stock
The technology stock achieved the highest rating in several categories. These include the EV/Sales ratio, which is currently 4.7, and sales growth (TTM). It was also impressively high at almost 62 per cent. The same applies to the debt ratio, which remains solid at 0.3.
But the score for the Rule of 40, which combines sales growth and profitability, is also at a high level of 62 per cent, signalling strong profitable growth.
Another positive signal from the HGI analysis can be seen in the PEG ratio. It puts the P/E ratio in relation to growth, as the full name Price/Earnings-to-Growth well describes. With a value of around 1.3, an attractive level is achieved here. It could indicate that earnings growth is reasonably related to the current valuation. In the HGI analysis of Micron Technology shares, this value received two out of a possible three points.
However, the gross margin is a real weakness: at 22.4 per cent, it is extremely low compared to other high-growth companies and scores no points on the rating scale. A low gross margin indicates a low level of vertical integration and a high dependency on other suppliers.
It is also striking that Micron Technology has shown fluctuations in sales growth in recent years, with a decline of almost 50 per cent in 2023, which was, however, offset by strong growth in 2024. This shows the real weakness of the highly cyclical technology stock. Sales growth over the last twelve months should therefore not be overstated, as the next slump is on its way.
Overall, however, the Micron share performs strongly in the HGI analysis in terms of key growth figures and stands out as an attractive company for growth-oriented investors within the framework of the HGI strategy. However, timing is crucial for a good return. In the long term, the HGI score is likely to fall back to a significantly lower level as sales decline again. Historically, the score was often between five and six.
Source: HGI score History of the Micron Technology stock
Source: Valuations of the Micron stock
The valuation of the Micron share reflects the conflicting priorities in which the company operates: high growth opportunities, but also major fluctuations and an immense need for capital.
With a market capitalisation of $113 billion, Micron is certainly one of the big players in the semiconductor industry – at least in the field of memory products. The current PE (price-earnings) ratio based on the last twelve months is 160, which at first glance seems extremely high. However, this value should be seen in the context of the high volatility. It reflects the cyclical nature of the memory chip business, where profits and margins are highly dependent on market conditions. However, the expected P/E ratio of 12 indicates a significant improvement in profitability and could even reach single digits if growth continues. This figure would by no means be high for a company that has recently experienced strong growth, despite its cyclical nature.
The situation is different for the EV/FCF, the enterprise value including debt in relation to free cash flow. At over 1000, it is at a very high level, but this is due to the low free cash flow of late. On the one hand, the main problem is the high level of expenditure. For example, over USD 8 billion in CAPEX is expected in 2024. Often, the spending is even in double digits. This can be explained by the fact that the production of memory chips requires high capital expenditure for factories and research. On the other hand, gross cash flows fluctuate greatly due to the market conditions described. In the last twelve months, free cash flow was just $121 million. However, in good years, values of $2.5 to $3 billion are possible, as the 2021 and 2022 fiscal years show. With AI growth, even $5 billion or more in free cash flows could appear realistic in the future.
Source: Balance sheet data from Micron Technology
The dividend is similarly low, with a dividend yield of 0.5 per cent. However, this figure is by no means poor, as Micron distributes significantly less than half of its net income and reinvests the majority of its capital to secure future growth and market opportunities. The company's low distributions are one of the reasons why it ends up with a solid cash balance of over $8 billion. However, the relatively high figure is probably also necessary to bridge periods of weakness and to continue investing in strategic growth areas.
Micron Technology is in a promising position to benefit from long-term trends in the technology industry, particularly the growing potential of AI, cloud computing and data centres. The company's recent revenue growth of 62 per cent suggests that it is already benefiting well from these trends. In the future, the company could benefit even more from a potential AI supercycle, as this tends to lead to increased demand for high-performance memory solutions and memory chips. In particular, demand for DRAM and NAND memory, which are essential for data centres and AI applications, could provide Micron with strong growth in the coming years.
In addition to these opportunities, the stock's valuation is also an advantage: with an expected P/E ratio of 12, Micron Technology is relatively inexpensive compared to many other technology companies. This could indicate that the market has not yet priced in the company's full potential and is focusing on the risks. However, investors who believe in the long-term growth opportunities in the field of storage technology and in the continuous development of AI may see this as an opportunity.
However, there are also significant risks associated with Micron stock. After all, the memory chip industry is known for its cyclicality – phases of high demand are often followed by phases of oversupply and price erosion. This volatility can, as we know, lead to strong fluctuations in margins and profits, as the past has shown. The enormous capital requirements for research and development and for the expansion of production capacities also weigh on companies' cash flows and can become a serious problem in weaker market phases.
In addition, competitive pressure from other major semiconductor manufacturers, particularly in Asia, could pose a risk. Industry giants such as Samsung and SK Hynix are also investing heavily in memory technology, which could further increase price pressure and competition for Micron. Both have economies of scale compared to Micron. But they are also technologically quite a bit ahead. For example, Samsung was often the first to offer new storage technologies such as 3D NAND and advanced DRAM chips. In addition, there is the geopolitical uncertainty that could affect the semiconductor market due to trade conflicts and export restrictions. Here, too, Micron has already taken a hit.
Nevertheless, Micron Technology could offer investors attractive long-term growth opportunities in an area that is central to the future of technology. In summary, the stock is a bet on growth impulses from the AI revolution and the expansion of data centres. The price is not high. At the same time, investors should be aware of the risks of cyclicality and high capital expenditure, which can lead to fluctuations in performance. However, those willing to accept this volatility could benefit from Micron's strong market potential over the long term.
Source: Analysts‘ opinions and target prices for Micon Technology stock
Analysts’ opinions on Micron Technology shares are also positive overall. Of the 35 analysts who have issued a target price for 2025, the average price target is USD 146.37, which corresponds to a potential of 42.74 per cent compared to the current price. The highest target price is $250, the lowest $70. This fact alone speaks to the uncertainties in the semiconductor market.
More exciting, however, is the sentiment of the analysts, of whom 38 of the 42 analysts recommend buying Micron stock, while three recommend holding and only one analyst recommends selling.
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The author and/or persons or companies associated with the StocksGuide own or may own shares in Micron Technology. This article represents an expression of opinion and not investment advice. Please note the legal information.