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Is Micron Stock A Buy As Memory-Chip Market Recovers?

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 70% of Micron’s revenue in its fiscal first quarter. Nand flash memory accounted for 27% 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, Toshiba, Western Digital (WDC), SK Hynix 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 Jan. 7, Micron beat Wall Street’s targets for its fiscal first quarter and guided higher for the current quarter. The next day, MU stock jumped to a 20-year high on the news before pulling back in a volatile trading session.

Micron earned an adjusted 78 cents a share on sales of $5.77 billion in the quarter ended Dec. 3. Analysts expected Micron earnings of 71 cents a share on sales of $5.73 billion. On a year-over-year basis, Micron earnings rose 63% while sales climbed 12%.

It was Micron’s third consecutive quarter of sales growth on a year-over-year basis, after five down quarters. Micron’s earnings rose for the second straight quarter, after six down quarters.

On March 3, Micron increased its revenue and earnings guidance for its fiscal second quarter, which ended March 4. MU stock fell 2.2% the day it issued the news amid a broad sell-off in tech stocks.

Micron upped its sales outlook range to $6.2 billion to $6.25 billion, vs. its prior guidance of $5.6 billion to $6 billion. Its sales in the year-earlier period were $4.8 billion.

It now expects to earn an adjusted 93 to 98 cents a share, vs. its previous outlook for 68 to 82 cents a share. In the same quarter last year, it earned an adjusted 45 cents a share.

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 Jan. 7 conference call with analysts, Chief Executive Sanjay Mehrotra boasted about Micron’s technological advancements.

“For the first time in our history, Micron is simultaneously leading on DRAM and Nand technologies, and we are in an excellent position to benefit from accelerating digital transformation of the global economy fueled by AI, 5G, cloud, and the intelligent edge.”

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.

The next catalyst for MU stock could be its fiscal second-quarter earnings report, due March 31.

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 84 out of a possible 99, according to the IBD Stock Checkup tool. That means it has outperformed 84% 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 97 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 B-, 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.

MU stock ended the regular session March 5 at 88.93.

In a positive sign, MU stock found support and rallied off its 50-day moving average line.

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.

Micron ranks first out of nine stocks in IBD’s Computer-Data Storage industry group. The group ranks No. 39 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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