MU - Micron Technology: The Stock Trading At 14.7x P/E In 2025 Is A Buy (Rating Upgrade)
2024-06-30 23:27:09 ET
Summary
- Micron suffered from a 7% pullback post-earnings despite beating Q3 FY2024 expectations and providing better-than expected Q4 guidance, presenting a compelling buying opportunity.
- Its top-line growth has rebounded significantly from a 50% decline in FY2023, driven by the AI boom, with an expected 60.5% YoY growth in FY2024 and robust margin expansion.
- The Street remains bullish on MU's earnings growth outlook, projecting a significant 672.6% YoY non-GAAP EPS increase in FY2025.
- Q4 FY2024 capex is expected to increase to 36% of total revenue from 30.6% in Q3 FY2024, and management plans a substantial further increase in capex for FY2025, which will impact FCF.
- MU stock's non-GAAP P/E FY2025 to be 14.7x (BBG consensus), significantly below the S&P 500's P/E FY2025 of 19.6x.
Investment Thesis
Micron's ( MU ) stock triggered a 7% pullback despite a better-than-expected Q3 FY2024 earnings result. Its Q4 FY2024 guidance also topped the market consensus. Given the strong rally this year, the post-earnings selloff might be driven by consolidation or concern about a significant increase in capex impacting its FCF in FY2025. Nevertheless, MU's top-line growth trajectory has significantly reaccelerated since early this year, driven by price hikes and strong demand for high-margin AI-related products, including High Bandwidth Memory ((HBM)), high-capacity DIMMs, and data center SSDs....
Micron Technology: The Stock Trading At 14.7x P/E In 2025 Is A Buy (Rating Upgrade)