Memory-chip maker Micron Technology (MU) is benefiting from an improving business climate, which has boosted MU stock. After its recent surge, some investors might be wondering: Is Micron stock a buy right now?
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The memory-chip market hit the skids in the second half of 2018 when sales of smartphones, personal computers, servers and other gear slowed. But memory-chip sales rebounded in late 2020.
Boise, Idaho-based Micron makes two main types of memory chips: DRAM and Nand. Dynamic random-access memory, or DRAM, accounted for 71% of Micron’s revenue in its fiscal second quarter. Nand flash memory accounted for 26% of its revenue during the period.
DRAM chips act as the main memory in PCs, smartphones and other devices, working closely with central processing units. Nand flash provides longer-term data storage.
In DRAM chips, MU stock competes with South Korea’s Samsung Electronics and SK Hynix.
In Nand flash chips, Micron competes with Samsung, SK Hynix, Kioxia, Western Digital (WDC) and Intel (INTC). On Oct. 19, Intel announced a deal to sell its Nand memory chip business to SK Hynix for $9 billion.
MU Stock Fundamental Analysis
On March 31, Micron beat Wall Street’s targets for its fiscal second quarter and guided higher for the current period. The next day, MU stock jumped 4.8% on the news.
Micron earned an adjusted 98 cents a share on sales of $6.24 billion in the quarter ended March 4. Analysts expected Micron earnings of 95 cents a share on sales of $6.21 billion. On a year-over-year basis, Micron earnings jumped 118% while sales climbed 30%.
It was Micron’s fourth consecutive quarter of sales growth on a year-over-year basis, after five down quarters. Micron’s earnings rose for the third straight quarter, after six down quarters.
For the current quarter, Micron expects to earn an adjusted $1.62 a share on sales of $7.1 billion. That’s based on the midpoint of its guidance for the fiscal third quarter. Wall Street was modeling Micron earnings of $1.32 a share on sales of $6.79 billion. In the year-earlier period, Micron earnings were 82 cents a share on sales of $5.31 billion.
On March 16, Micron announced that it is ceasing development of 3D XPoint chips, which has been a drag on earnings. MU stock rose 2.9% on the news.
Micron Shipping 5th Generation 3D Nand Chips
On Nov. 9, Micron announced it had started volume shipments of the world’s first 176-layer 3D Nand flash memory chips. The product achieves “unprecedented, industry-pioneering density and performance,” the company said. MU stock rose 1.5% on the news.
“Micron’s 176-layer Nand sets a new bar for the industry, with a layer count that is almost 40% higher than our nearest competitor’s,” Scott DeBoer, executive vice president of technology and products at Micron, said in a news release.
Customers are deploying the fifth-generation of 3D Nand chips in applications such as 5G wireless, cloud computing and artificial intelligence.
On a March 31 conference call with analysts, Chief Executive Sanjay Mehrotra boasted about Micron’s technological advancements.
“Following last quarter’s introduction of 176-layer Nand into volume production, in fiscal Q2, we began volume production on our 1-alpha DRAM node, solidifying our technology leadership in both DRAM and Nand,” Mehrotra said. “We are in an excellent position to capitalize on the strong demand for memory and storage driven by artificial intelligence and 5G across the data center, the intelligent edge, and user devices.”
As 2020 ended, several Wall Street firms named MU stock as a “top pick” for 2021 in semiconductor stocks. Those firms included UBS, Evercore ISI, Mizuho and Rosenblatt Securities.
Micron Stock Technical Analysis
On Nov. 6, Micron stock broke out of a cup-with-handle base at a buy point of 54.92, according to IBD MarketSmith charts. A three-weeks-tight pattern in late December offered an add-on buy point at 74.71.
MU stock hit a nearly 21-year high of 95.75 on March 1, ahead of the market correction. It reached its all-time high of 97.50 in July 2000 during the dot-com bubble.
Micron stock has an IBD Relative Strength Rating of 82 out of a possible 99, according to the IBD Stock Checkup tool. That means it has outperformed 82% of stocks over the past 12 months. The best growth stocks typically have RS Ratings of at least 80.
MU stock has an IBD Composite Rating of 98 out of 99. The best growth stocks have a Composite Rating of 90 or better. IBD’s Composite Rating combines five separate proprietary ratings into one easy-to-use rating.
Micron stock has an IBD Accumulation/Distribution Rating of C+, indicating modest institutional buying of MU stock.
Is MU Stock A Buy Right Now?
Micron stock is not a buy right now. It is trading well above the 5% chase zone of its last breakout, according to IBD trading guidelines.
Micron stock needs to form a new base in the right market conditions before setting a new potential buy point. Check out IBD’s Big Picture column for the current market direction.
MU stock ended the regular session April 1 at 92.41.
In a positive sign, MU stock has found support and rallied off its 10-week moving average line.
Micron ranks first out of nine stocks in IBD’s Computer-Data Storage industry group. The group ranks No. 27 out of 197 industry groups that IBD tracks. Growth stock investors should focus on the leading stocks in the top 40 industry groups.
To find the best stocks to buy or watch, check out IBD Stock Lists and other IBD content. Investors also can find top prospects on IBD’s Leaderboard, MarketSmith and SwingTrader platforms.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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