Continued growth of demand for artificial intelligence hardware is proving a boon for this memory chip company.
Shares of computer technology outfit Micron Technology (MU 12.79%) are up more than 15% midday Thursday following Wednesday evening’s release of its fiscal fourth-quarter results. The stock’s biggest single-day gain in over a decade, however, mostly stems from its bullish guidance for the quarter currently underway.
Micron firing on all cylinders
Micron Technology turned $7.75 billion worth of revenue into per-share operating earnings of $1.18 during the three-month stretch ending in late August. Both are well up from year-ago comparisons of a top line of $4.01 billion and a per-share loss of $1.07, although keep in mind the environment a year earlier was (very) cyclically weak. Perhaps more important, both of last quarter’s numbers topped analyst expectations of $7.65 billion in sales and profits of $1.11 per share.
Continued demand for its high-bandwidth memory chips used in artificial intelligence (AI) computing platforms gets most of the credit for the strong showing.
This strength isn’t expected to abate in the immediate future either. Micron’s revenue guidance for the first quarter of fiscal 2025 now underway is $8.7 billion at the midpoint of the suggested range, versus analysts’ consensus of only $8.27 billion. The company’s also anticipating per-share earnings of $1.74 — give or take $0.08 — while analysts had been modeling an average of $1.52 per share.
CEO Sanjay Mehrotra went on to say in Wednesday’s fiscal Q4 press release, “We forecast record revenue in fiscal Q1 and a substantial revenue record with significantly improved profitability in fiscal 2025.”
Value outweighs the volatility
The bullish response to the unexpectedly pleasant surprise is impressive, but also intimidating.
See, it’s not often a stock jumps 15% in a single session and then tacks on more immediate gains. And in this case, Thursday’s surge has carried Micron shares to more than 30% above its early September low. The sheer scope of such a move combined with the gap left behind by today’s opening leap makes it even tougher for the stock to continue rallying… at least not without taking some sort of break first.
Just don’t linger on the sidelines for too long if you’re interested in owning a piece of this technology company. The stock’s also still well below its June peak, and priced reasonably at only 12.6 times this fiscal year’s earnings estimate of $8.79 per share. Indeed, continued demand for AI tech is expected to lead Micron Technology to a per-share profit of $12.91 next fiscal year. The stock’s only trading at 8.5 times that figure, which is dirt cheap by almost any standard.
The chief concern here for risk-tolerant growth investors is just the extreme volatility that’s sure to persist.
James Brumley has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
