Is Micron Technology Inc (NASDAQ:MU) stock a buy right now?

- May 13, 2017

Micron Technology Inc (NASDAQ:MU) is a US company established in 1978 and headquartered in Boise, Idaho, USA. The company engages in the design and creation of memory and semiconductor technologies. The company manufactures and distributes products such as Dynamic Random-Access Memory ((DRAMs)), NAND flash memory, CMOS image sensors, other semiconductor components and memory modules.

Put simply, Micron Technology Inc (NASDAQ:MU) develops the micro chips in our smartphones, PCs, cameras, and other electronic devices that allow us to store and access data (“memory”). Added to this they also make the sensors used in smartphone cameras, web cameras, and digital cameras. They have leading edge products especially in the areas of 3D NAND.

The company’s four business units;

  •    Compute and Networking Business Unit – Sells memory products sold into computers, networking, graphics, and cloud server markets.
  •    Storage Business Unit –  Unit sells products for enterprise, client, cloud, and removable storage.
  •    Mobile Business Unit –  Sells memory products for smart phone, tablet, and other mobile-device markets.
  •    Embedded Business Unit – This unit sells memory products for automotive, industrial, connected home, and consumer electronics markets.

Source

As of end Q2, 2016, Micron Technology Inc (NASDAQ:MU) had a 10.6% share of the global NAND flash market, and an 11.4% share of the mobile DRAM market.  The NAND market is growing strongly as smartphones each year offer more and more memory, hence NAND content has tripled from 2014 to 2016.  This has helped drive profit growth for the industry.  Micron Technology also partners on certain products with other companies such as Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), and Nvidia (NASDAQ:NVDA).  Not a bad group to be associated with.

Source

A key catalyst for the company is the continuing growth of personal electronic devices with their need for memory storage.  Huge growth areas include the Internet of Things ((IoTs)), cloud storage, autonomous vehicles, and intelligent personal assistants such as Amazon’s (NASDAQ:AMZN) Echo and Google (NASDAQ:GOOG, GOOGL) Home.

Source

Valuation

Micron Technologies has a market cap of $30.7b, and an Enterprise Value of $36.7b.  2017 PE is just 7.45 due to a large forecast revenue and earnings increase in 2017.  Net profit margin for 2017 is forecast at 21.8% and forecast to increase in 2018.  2017 price to book ratio is 1.80 times.  Currently debt is a slight concern at $5.5b; however it is forecast to fall to $1.7b by 2018. The 2017 forecast net debt/EBITDA ratio is manageable at 0.64 times.

Analyst consensus estimate price target is $38.63, representing 39% upside.

Micron Technology stock price history

Source

Competitors

Advanced Micro Devices (NASDAQ:AMD), Intel (NASDAQ:INTC), Nvidia (NASDAQ:NVDA), Samsung (OTC:SSNLF), Toshiba (OTC:TOSBF), SK Hynix (OTC:HXSCF), and the up and coming Chinese DRAM and NAND companies.

Risks

The main risks revolve around the changing technology market, fierce competition, oversupply, currency risk from overseas earnings, and Micron Technology’s current high debt level.  The company currently has strong margins, and should produce plenty of surplus cash to quickly reduce the debt.

Conclusion

Micron Technology is currently undervalued based on forward earnings forecasts, mostly due to the volatility of earnings and fierce competition in the semiconductor industry.  The company is in a key growth area supplying leading edge memory products to an ever expanding electronics market.  The current surge in data due to increased global inter connectivity, combined with the next booms of cloud storage, the IoTs and intelligent personal assistants should lead to enormous demand for Micron’s microchips going forward.  On the negative side, Micron Technology faces fierce competition in what is mostly a commoditized market where memory chips prices continue to fall on a per bit basis.

I would recommend taking a position now in MU stock while the valuation is very attractive.  Micron Technology (NASDAQ:MU) is definitely a name to remember, and MU stock is one you won’t forget (if you miss the opportunity).

This entry was posted in 2017 Stock Outlook, Editor's Pick, Hot Stocks, Technology and tagged , , , , , , , . Bookmark the permalink. Follow any comments here with the RSS feed for this post. Post a comment or leave a trackback: Trackback URL.

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    Is Micron Technology Inc (NASDAQ:MU) stock a buy right now?

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    Is Micron Technology Inc (NASDAQ:MU) stock a buy right now?

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