Micron Technology, Inc. (MU) is set to unveil its fiscal 2024 second-quarter earnings on March 20. The company is anticipated to record a revenue of $5.34 billion, reflecting a 44.6% year-over-year increase. However, it is also expected to report a loss per share of $0.25 during the same period.

In recent times, MU, like many semiconductor peers, has stood out in the stock market owing to the mounting demand for its memory and storage chips. During the quarter that ended on November 30, 2024, its revenue rose by 15.7% to $4.73 billion, breaking a streak of five consecutive revenue declines.

However, in the same quarter, MU’s non-GAAP operating loss significantly widened year-over-year to $955 million. Its non-GAAP net loss and non-GAAP loss per share stood at $1.05 billion and $0.95, respectively, a significant rise from net loss and loss per share of $39 million and $0.04 in the previous year’s period.

Furthermore, as of November 30, 2023, the company’s cash and cash equivalents amounted to $8.08 billion, down from $8.58 billion as of August 31, 2023. Also, its total assets came in at $63.78 billion, compared to $64.25 billion as of August 31, 2023. Shares of MU have plunged 1% over the past five days to close the last trading session at $93.78.

Here are the fundamental aspects of MU that could influence its price performance in the near term:

Mixed Historical Growth

Over the past three years, MU’s tangible book value and total assets increased at a CAGR of 2.5% and 5.9%, respectively. However, its revenue and EBITDA declined at respective CAGRs of 9.8% and 48.4% over the same time frame.

Mixed Analyst Estimates

The consensus revenue estimate of $22.80 billion for the fiscal year ending August 2024 reflects a 46.7% year-over-year increase. However, the company is expected to report a loss per share of $0.24 for the same year.

Poor Profitability

The stock’s trailing-12-month gross profit margin of negative 14.49% compares with the industry average of 49.18%. Its trailing-12-month EBITDA margin and trailing-12-month asset turnover ratio of 7.87% and 0.25x are 12.4% and 59.5% lower than the industry averages of 8.98% and 0.61x, respectively.

In addition, the company’s trailing-12-month levered FCF margin of negative 24.06% compares with the 9.01% industry average.

Stretched Valuation

In terms of trailing-12-month EV/Sales, MU is trading at 6.63x, 118.6% higher than the industry average of 3.03x. Its trailing-12-month EV/EBITDA and trailing-12-month Price/Sales of 84.32x and 6.31x are 368.1% and 121.3% higher than the respective industry averages of 18.02x and 2.85x.

Additionally, the stock’s trailing-12-month Price/Cash Flow of 51.04x compares with the industry average of 20.28x.

POWR Ratings Exhibit Weak Prospects

MU’s bleak outlook is reflected in its POWR Ratings. The stock has an overall rating of D, which translates to Sell in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. MU exhibits a D grade for Value, which aligns with its lofty valuation that surpass industry standards. Similarly, it holds a D grade for Stability, justified by its 60-month beta of 1.24, notably exceeding the benchmark of 1.

MU is ranked #77 out of 89 within the Semiconductor & Wireless Chip industry. Click here to access MU’s Growth, Momentum, Sentiment, and Quality ratings.

Bottom Line

Despite revenue growth, MU incurred substantial losses in its most recent reported quarter, alongside declining cash reserves and a reduction in total assets, suggesting looming financial hurdles. Furthermore, with an elevated valuation and unstable conditions, it seems wise to steer clear of MU at the moment.

How Does Micron Technology, Inc. (MU) Stack Up Against Its Peers?

While MU has an overall grade of D, equating to a Sell rating, you may check out these A (Strong Buy) rated and B (Buy) rated stocks within the Semiconductor & Wireless Chip industry: Cirrus Logic, Inc. (CRUS), ChipMOS TECHNOLOGIES INC. (IMOS) and Everspin Technologies, Inc. (MRAM). To explore more Semiconductor & Wireless Chip stocks, click here.

What To Do Next?

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MU shares fell $1.88 (-2.00%) in premarket trading Tuesday. Year-to-date, MU has gained 9.89%, versus a 7.90% rise in the benchmark S&P 500 index during the same period.

About the Author: Aanchal Sugandh

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns. More...

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