As artificial intelligence (AI) adoption soars, demand for computing power and cloud storage is soaring, with AI-powered storage market revenues likely to reach $282.9 billion by 2033, a compound annual growth rate (CAGR) of 26.5%. Meanwhile, smartphones, PCs, and servers are integrating more dynamic random access memory (DRAM) to keep up with AI demands. This year alone, smartphone and notebook DRAM is expected to grow by 14% and 12%, respectively, while servers could see a 17.3% increase.
Micron Technology Inc. (MU) has been riding this growth wave to soaring profits, thriving in the high-bandwidth memory market and feeding AI’s relentless data demands. But mixed earnings from big tech companies have led to increased selling pressure in the market recently, and MU’s shares are down more than 40% from their June peak.
For investors who have been waiting for AI stocks to calm down after their recent surge, the recent drop in Micron’s stock could be a great opportunity for investors looking to buy a dividend-paying semiconductor stock with AI growth potential.
Let’s take a closer look.
About Micron Technology Stock
Founded in 1978, Micron Technology, Inc. (MU) is a leading manufacturer of innovative memory and storage solutions, providing essential technology for computing, networking and mobile communications industries. With a market capitalization of $121.8 billion, the leading company produces cutting-edge DRAM, NAND Flash and SSDs, making essential components of today’s digital world.
Despite a sharp pullback from its June highs, Micron’s stock price is up 35.9% over the past 52 weeks, outperforming the S&P 500 index’s ($SPX) 18.5% return and the iShares Semiconductor ETF’s (SOXX) 20.4% gain.
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On July 23, Micron Technology paid shareholders a quarterly dividend of $0.115 per share. The technology hardware innovator offers an annualized dividend of $0.46 per share, yielding 0.42%. Additionally, the dividend payout ratio remains at 28.87%, leaving room for growth initiatives and potential future dividend hikes.
Micron Technology’s stock is trading at 7.32 times sales, making it a discount to many of the big semiconductor companies.
Micron Technology’s third-quarter results beat Wall Street expectations
On June 26, Micron announced strong third-quarter earnings that far surpassed Wall Street expectations. The company’s total revenues rose 81.6% year over year to $6.8 billion, buoyed by strong demand for memory and storage products, especially in the AI sector. Adjusted EPS rose to $0.62 per share from a loss of $1.43 in the same period last year, also beating expectations.
Key to this success was Micron’s focus on high-margin products such as high-bandwidth memory (HBM), which drove HBM3E revenue to over $100 million and strong margins. The critical role HBM plays in AI systems enables higher performance and lower power consumption, highlighting Micron’s market leadership. Additionally, the company’s data center SSD revenue doubled sequentially to a record high, reflecting strong AI-driven demand across DRAM and NAND.
Micron Technology shares fell 7.1% as investors reacted to a strong third-quarter earnings report but a revenue outlook that was in line with expectations. The semiconductor company had forecast revenue of $7.6 billion, which fell short of the lofty growth bar some had expected. This overshadowed Micron’s forecast of positive free cash flow growth in the fourth quarter.
While the future looks promising, Micron faces challenges including tight memory supplies and a reliance on high-margin products such as HBM, which come with their own risks if demand shifts.
Analysts tracking Micron Technology expect EPS of $0.58 in fiscal 2024, recovering from a loss in fiscal 2023, with bottom line earnings surging to $8.75 in fiscal 2025.
What do analysts expect from Micron Technology stock?
Amid recent volatility in semiconductor stocks, Bank of America’s Vivek Arya endorsed Micron’s “buy” rating on July 29.
Analysts are optimistic about the prospects of MU stock, collectively rating it a ‘Strong Buy.’ Of the 27 analysts covering the stock, 24 are very bullish with a ‘Strong Buy’ rating, 2 have recommended a ‘Moderate Buy’ rating, and 1 has recommended a ‘Hold’ rating.
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MU’s average price target of $164.26 suggests upside potential of 77.2% from current levels. The Street’s highest price target is $225, according to Rosenblatt Securities analyst Hans Mosesmann.
On the date of publication, Sristi Suman Jayaswal did not hold (either directly or indirectly) any positions in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. For more information please see Barchart’s disclosure policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
