Summary
Micron Technology stock is extremely cheap by the standards of a fast-growth tech company.
It grew earnings at 175% for the most recent quarter and 118% for the TTM period, yet trades at just 16.7 times earnings.
The stock does face risks owing to volatile RAM prices, but today’s market conditions favor the company.
In this article, I will outline a bullish thesis on Micron Technology, based on its stellar combination of growth and value.
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nazarethman/E+ via Getty Images Micron Technology ( MU ) is one of the few value opportunities available in the semiconductor (semi) space today. Trading at very low multiples to earnings, sales and book value, it looks like a bargain basement deal.
This is not entirely without reason. RAM prices tend to see booms and busts, and some industry analysts expect prices to drop. Price fluctuations have created problems for Micron in the past. In 2019, for example, RAM prices dropped following a boom the year before. Such fluctuations can always occur, resulting in lower revenue for Micron.
Additionally, Micron’s relationships with Chinese companies have been under regulatory pressure lately. MU lost its licenses to sell to Huawei in 2019 and, according to recent reports, hasn’t gotten them back .
Micron’s ban on selling to Huawei was by order of the U.S. Bureau of Industry and Industry (“BIS”). The bureau, concerned about China accessing U.S. tech, banned selling semiconductors to the Chinese smartphone giant. These rules were first introduced by the Trump administration in 2019. In 2020 they were tightened to close loopholes Huawei had been using to gain access to U.S. chips indirectly.
The BIS’s actions were a huge blow to Micron Technology. Huawei made up 10% of Micron’s revenue as recently as Q1 2020. MU stock predictably tanked when news that it was banned from selling to Huawei was released. The stock selloff turned out to have been justified, as Micron’s revenue declined 8% for the 2020 fiscal year.
Fortunately, things have since turned around. Micron Technology has spent 2021 building its business back up following the export ban. It has made up for the loss of Huawei’s business by increasing its shipments to other clients. In 2021, MU is cranking out solid growth in revenue, and even more in earnings.
In this article, I will outline a bullish thesis on MU, starting by looking at its competitive position and moving on to technical and financial factors. I’ll make the case that MU’s industry position has never been better, supporting continued growth in revenue and earnings. Finally, I’ll explore Micron’s exciting new innovations in DRAM technology. So without further ado, let’s jump into our deep dive on Micron’s competitive landscape. Competitive Landscape
Micron Technology is a semi company best known for producing:
Micron’s products are widely available to both consumers and businesses. Its mobile chips are mainly supplied to industry buyers, while its SD cards and SSDs are available to consumers.
The fastest-growing and most interesting of Micron’s markets is the mobile chip market. It supplies mobile chip DRAM to companies like Apple ( AAPL ), which use them in mobile devices like the iPhone and iPad. According to Sammobile, Micron Technology is third in this industry , with a 14% market share. Its biggest competitors include Samsung ( OTC:SSNLF ) and SK Hynix, with 49% and 23% market shares respectively. Mordor Intelligence expects the mobile chip industry to grow at 7.5% CAGR to 2026. If the industry hits that growth level and Micron gains market share, then double digit revenue growth will be possible going forward.
The other markets Micron operates in are less interesting, but are worth mentioning briefly.
Micron produces SD cards from 256GB to 1TB in capacity. Its consumer SD cards are designed for 4K video and fast file transfers. Micron competes with Western Digital ( WDC ), Lexar and Samsung in this space.
Micron makes SSD drives for both consumers and companies. Its SSDs are used in PCs, data centers and vehicles. It also supplies parts for SSDs. It competes with companies like Samsung in this space.Lastly, Micron is well known for manufacturing RAM–the memory component that allows computer multi-tasking. Micron sells RAM to both consumers and industry clients. Its RAM sticks are sold to consumers under the brand name Crucial, while its RAM for memory chips is sold to industry partners. Micron Leads Innovation in Mobile Memory The semi space is nothing if not competitive, and […]
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