Micron Technology, Inc. (MU - Get Rating) designs, manufactures and sells memory and storage products worldwide. The company operates through four segments: Compute and Networking Business Unit; Mobile Business Unit; Storage Business Unit; and Embedded Business Unit.

Recently MU slashed its fourth-quarter revenue outlook to in-line or below the low end of $6.80 to $7.60 billion, citing tense macroeconomic and logistic conditions.

On June 30, 2022, MU’s President and CEO, Sanjay Mehrotra, said, “Recently, the industry demand environment has weakened, and we are taking action to moderate our supply growth in fiscal 2023.”

However, he added, “We are confident about the long-term secular demand for memory and storage and are well positioned to deliver strong cross-cycle financial performance.”

MU has lost 7.8% over the past month to close the last trading session at $57.01. Moreover, it has lost 38.8% year-to-date and 23% over the past year.

Here is what could shape MU’s performance in the near term:

Recent Developments

On August 9, 2022, MU announced its plans to invest $40 billion in order to build leading-edge memory manufacturing in the U.S. The investment aims to create up to 40,000 new American jobs, including approximately 5,000 highly paid technical and operational roles at MU itself. The new facility is expected to boost the company’s capabilities.

On June 28, 2022, MU started shipping the world’s first 176-layer NAND SATA SSD designed for data center workloads. Alvaro Toledo, vice president and general manager of Data Center Storage at MU, said, “This cutting-edge NAND enables long-term availability of SATA SSDs while extending a trusted architecture that speeds and simplifies customer qualifications.”

Solid Financials

MU’s revenue came in at $8.64 billion for the third quarter ended June 2, 2022, up 16.4% year-over-year. Its operating income came in at $3 billion, up 67% year-over-year.

Furthermore, its non-GAAP net income came in at $2.94 billion, up 35.3% year-over-year, while its non-GAAP EPS came in at $2.59, up 37.8% year-over-year.

Attractive Valuations

MU’s forward EV/S of 1.89x is 31.1% lower than the industry average of 2.74x. Moreover, its forward P/S of 2.03x is 25.4% lower than the industry average of 2.71x. In addition, its forward EV/EBITDA of 3.44x is 73.2% lower than the industry average of 12.82x. Also, its forward P/Cash Flow of 4.32x is 76.5% lower than the industry average of 18.36x.

Robust Profitability Margins

MU’s trailing-12-month EBIT margin of 34.51% is 365.3% higher than the industry average of 7.42%, while its trailing-12-month EBITDA margin of 55.67% is 326% higher than the industry average of 13.07%. Also, its trailing-12-month net income margin of 30.61% is 620.6% higher than the industry average of 4.25%.

Furthermore, its trailing-12-month ROCE, ROTC, and ROTA of 21.66%, 13.12%, and 15.18% are higher than the industry averages of 7.28%, 3.98%, and 2.75%, respectively.

POWR Ratings Reflect Promising Outlook

MU has an overall rating of B, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

It has an A grade for Value, consistent with its lower-than-industry valuation multiples.

Also, the stock has a B grade for Quality, in sync with its higher-than-industry profitability margins.

In the 95-stock Semiconductor & Wireless Chip industry, MU is ranked #40. The industry is rated B.

Click here for the additional POWR Ratings for MU (Growth, Momentum, Stability, and Sentiment).

View all the top stocks in the Semiconductor & Wireless Chip industry here.

Bottom Line

MU is constantly expanding its capabilities despite macroeconomic headwinds. Moreover, its revenue and EPS are expected to grow 11.3% and 35.1% year-over-year to $30.82 billion and $8.19 in 2022. Furthermore, Wall Street analysts expect MU to hit $73.57 in the near term, indicating a potential upside of 28.5%.

Therefore, investors should consider buying this beaten-down undervalued gem before it rebounds.

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

While MU has an overall POWR Rating of B, one might consider looking at its industry peers, STMicroelectronics N.V. (STM - Get Rating), Semtech Corporation (SMTC - Get Rating), and United Microelectronics Corporation (UMC - Get Rating), which have an overall A (Strong Buy) rating.

MU shares were trading at $56.22 per share on Tuesday afternoon, down $0.79 (-1.39%). Year-to-date, MU has declined -39.44%, versus a -15.59% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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