Micron stock analysis. MU Stock.
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Micron Technology supplies memory and storage hardware to some of the world’s largest companies. Its DRAM products help to power iPhones, smart vehicles, datacenters and more. While NAND flash and SSD drives are used for storage.
Based on the latest share price, Micron has a market cap of 81 billion dollars. With 12 billion of cash and investments and 12 billion of long-term debt, the enterprise value is roughly the same.
Meanwhile, the company has produced 23 billion in revenue over the last 12 months, 9.6 billion of EBITDA but only 1.6 billion of net income. So Micron is valued at 3.5 times revenue, 8.4 times EBITDA and 51 times earnings.
Micron is a tricky company to value. On the one hand the company should be well positioned as a beneficiary of huge trends like artificial intelligence, 5g and electric vehicles.
On the other hand, Micron is a cyclical stock that has seen wild swings in revenue. Revenue collapsed 23% in 2016, 23% in 2019 and this year looks like it will see a similar decline.
Even worse, margins collapsed in the last quarter, with the company posting a negative gross margin of -33% and a record loss of 2.31 billion.
The Micron CEO said that “The semiconductor memory and storage industry is facing its worst downturn in the last 13 years with an exceptionally weak pricing environment”
And Micron’s figures were published before news that China is to ban sales of Micron’s memory chips. Micron derives more than 10% of its revenue from China so this news should be significant.
And yet Micron stock is up almost 8% since the news broke. So what’s going on?
The main reason is the blowout earnings from Nvidia which is providing a tailwind to semiconductor and memory stocks across the board. Datacenters and large language models require large amounts of memory so Micron is seen as another AI play and Micron’s products are in high demand.
#stocks #investing #stockstobuy #micronstock
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Micron Technology supplies memory and storage hardware to some of the world’s largest companies. Its DRAM products help to power iPhones, smart vehicles, datacenters and more. While NAND flash and SSD drives are used for storage.
Based on the latest share price, Micron has a market cap of 81 billion dollars. With 12 billion of cash and investments and 12 billion of long-term debt, the enterprise value is roughly the same.
Meanwhile, the company has produced 23 billion in revenue over the last 12 months, 9.6 billion of EBITDA but only 1.6 billion of net income. So Micron is valued at 3.5 times revenue, 8.4 times EBITDA and 51 times earnings.
Micron is a tricky company to value. On the one hand the company should be well positioned as a beneficiary of huge trends like artificial intelligence, 5g and electric vehicles.
On the other hand, Micron is a cyclical stock that has seen wild swings in revenue. Revenue collapsed 23% in 2016, 23% in 2019 and this year looks like it will see a similar decline.
Even worse, margins collapsed in the last quarter, with the company posting a negative gross margin of -33% and a record loss of 2.31 billion.
The Micron CEO said that “The semiconductor memory and storage industry is facing its worst downturn in the last 13 years with an exceptionally weak pricing environment”
And Micron’s figures were published before news that China is to ban sales of Micron’s memory chips. Micron derives more than 10% of its revenue from China so this news should be significant.
And yet Micron stock is up almost 8% since the news broke. So what’s going on?
The main reason is the blowout earnings from Nvidia which is providing a tailwind to semiconductor and memory stocks across the board. Datacenters and large language models require large amounts of memory so Micron is seen as another AI play and Micron’s products are in high demand.
#stocks #investing #stockstobuy #micronstock
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NewsTranscript
00:00 Micron Technology supplies memory and storage hardware to some of the world's largest companies.
00:06 Its DRAM products help to power iPhones, smart vehicles, data centers and more, while NAND,
00:12 flash and SSD drives are used for storage. Based on the latest share price, Micron has
00:17 a market cap of $81 billion. With $12 billion of cash and investments and $12 billion of
00:23 long term debt, the enterprise value is roughly the same. Meanwhile, the company has produced
00:27 $23 billion in revenue over the last 12 months, $9.6 billion of EBITDA, but only $1.6 billion
00:34 of net income. So Micron is valued at 3.5 times revenue, 8.4 times EBITDA and 51 times
00:42 earnings. Micron is a tricky company to value. On the
00:45 one hand, the company should be well positioned as a beneficiary of huge trends like artificial
00:50 intelligence, 5G and electric vehicles. On the other hand, Micron is a cyclical stock
00:56 that has seen wild swings in revenue. Revenue collapsed 23% in 2016, 23% again in 2019 and
01:04 this year looks like it will see a similar decline. Even worse, margins collapsed in
01:08 the last quarter with the company posting a negative gross margin of -33% and a record
01:14 loss of $2.31 billion. The Micron CEO said that the semiconductor
01:19 memory and storage industry is facing its worst downturn in the last 13 years with an
01:24 exceptionally weak pricing environment. Micron's figures were published before news that China
01:30 is to ban sales of Micron's memory chips. Micron derives more than 10% of its revenue
01:35 from China, so this news should be significant. And yet Micron's stock is up almost 8% since
01:41 the news broke. So what's going on? The main reason is the blowout earnings from
01:45 Nvidia which is providing a tailwind to semiconductor and memory stocks across the board. Data centres
01:51 and large language models require large amounts of memory, so Micron is seen as another AI
01:56 play and Micron's products are in high demand. But Micron still struggles to maintain pricing
02:02 power. Super investors like Monish Pabrai claim that shrinking competition in the memory
02:07 business will lead to more stable pricing and smaller swings, but that is clearly not
02:11 playing out as seen by the recent collapse in revenue. Meanwhile, China has the resources
02:16 to invest heavily into this market and potentially become a major player.
02:20 Overall, there's not enough evidence that Micron can escape the cyclical nature of its
02:25 business and that makes the stock a risky bet. However, the AI trend is so big that
02:30 Micron is probably going to ride the AI hype train for a little while longer. Artificial
02:35 intelligence is clearly not a fad and it's something that big companies are spending
02:40 huge amounts of money on. That's why I'm giving the stock a cautious bullish rating,
02:44 but these are my personal opinions, not financial advice and I do own a small position in the