MU - My Lower Estimates Prove That Micron Is Being Underestimated
2024-07-01 22:40:35 ET
Summary
- I reaffirm my "strong buy" for Micron Technology, updating the fair stock price to $171.45 and projecting $275.07 by 2029, indicating 17.8% annual returns.
- Micron plans a $150 billion investment in manufacturing and R&D over the next decade, including building four new fabs with $20 billion in federal subsidies.
- Micron is third in the DRAM and NAND markets, trailing behind Samsung and SK Hynix. The company focuses on cost-efficiency to stay competitive.
- The DRAM and NAND markets are projected to grow annually by 2.98% and 6.39%, respectively, expanding Micron's addressable market from $175.2 billion to $298.93 billion by 2030.
- Potential for increased HBM sales and tax credits could raise the fair price to $191.12 and 2029 projection to $312.53. Risks include business volatility and increased CapEx to meet objectives.
Thesis
In my previous article about Micron Technology, Inc. ( MU ) I rated the stock as a "strong buy" after arriving at an estimated present fair price per share of $151.72 which was 37.4% higher than the stock price at that time of $110.40. I also calculated which could be the potential stock price for the year 2029, and the result was $199.64, which implies 13.5% annual returns, which is over the market's historic 10.50% annual returns.
Micron reported Q3 2024 earnings on June 26 . For the quarter, Micron reported an EP of $0.62 (which beat estimates by 16.98%) and revenues of $6.81B (which beat estimates by 0.02%). Nevertheless, the stock fell 6.5% as its FQ4 2024 outlook came out in line with the consensus.
After re-evaluating Micron in this article, and adding my HBM revenue estimates and the revenue that Micron could receive from the two factories that should be finished by 2029, I arrived at a fair stock price estimate of $171.45 and a future stock price estimate for 2029 of $275.07....
My Lower Estimates Prove That Micron Is Being Underestimated