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Prediction: This Artificial Intelligence (ai) Semiconductor Stock Is Set To Soar After Dec. 18
Surprisingly, Micron Technology (NASDAQ: MU) stock turned in a disappointing performance on the stock market in 2024. It clocked gains of just 20%, despite delivering solid results in recent quarters that point toward outstanding growth in the company's revenue and earnings.
Shares of the memory specialist are down 27% since hitting a 52-week high in mid-June. However, it won't be surprising to see the stock's fortunes changing after Micron releases its fiscal 2025 first-quarter results on Dec. 18.
Let's see why that may be the case.
Micron Technology's upcoming results could exceed expectations
Micron Technology is known for manufacturing memory chips for both computing and storage. This market is historically cyclical in nature, depending on the demand for personal computers (PCs) and smartphones. This explains why the global memory market plunged nearly 39% last year, as per Gartner's estimates, owing to a 4.4% drop in shipments of PCs, smartphones, and tablets.
The drop in device shipments was more pronounced in 2022, with a decline of 11.9%. Not surprisingly, Micron's financial performance in 2022 and 2023 suffered.
MU Revenue (TTM) data by YCharts.
However, the memory industry has been in turnaround mode this year. It's driven by catalysts such as artificial intelligence (AI) that are driving a jump in memory consumption across multiple areas, such as data centers, smartphones, and PCs. For example, the usage of high-bandwidth memory (HBM) in AI chips has increased at an incredible pace, as the likes of Nvidia have been integrating this type of memory to make their AI accelerators more powerful.
Nvidia's latest Blackwell B200 GPU is equipped with 192 gigabytes (GB) of HBM, which is a big improvement over the previous-generation H100's 96 GB and H200's 144 GB. This factor could help Micron deliver better-than-expected results. That's because when Nvidia released its latest quarterly results last month, management pointed out that its Blackwell production ramp-up is happening at a stronger-than-expected rate.
Nvidia points out that it is on track to "exceed our previous Blackwell revenue estimate of several billion dollars as our visibility into supply continues to increase." This is good news for Micron, as the chipmaker has already been supplying its HBM chips to Nvidia. The stronger Blackwell demand could help it beat the market's expectations. Catalysts such as HBM also explain why the global memory market is expected to generate $163 billion in revenue this year, up significantly from $92 billion last year.
Micron seems positioned to deliver impressive guidance as well. That's because the size of the memory market is expected to jump to $204 billion in 2025. HBM, of course, is set to play a central role in this market's growth. Micron anticipates this specific type of chip to generate $25 billion in revenue next year, up from $4 billion in 2023.
At the same time, new catalysts such as the incoming PC refresh cycle and the growth in the smartphone market could give Micron an additional boost. IDC estimates that the global PC market could show 4.3% growth in 2025, following a flat performance this year. Meanwhile, global smartphone sales are expected to grow in the low single digits next year.
The combination of these factors should ensure that the memory market continues to remain in good health in 2025. That should be enough to help Micron sustain the impressive growth momentum that it has gained in recent quarters.
Terrific growth and attractive valuation make buying the stock a no-brainer
Analysts expect Micron's revenue to jump 84% year over year to $8.71 billion in the first quarter of fiscal 2025. It is expected to post a profit of $1.77 per share, compared to a loss of $0.95 per share in the same quarter last year. Those numbers are well within Micron's guidance range. We have already seen that stronger demand from the likes of Nvidia could help Micron beat consensus expectations, and that could send the stock soaring following its quarterly report.
At the same time, Micron is expected to report outstanding top-line growth of 52% in fiscal 2025 to $38 billion, while earnings are estimated to shoot up to $8.78 per share from $1.30 per share in the previous fiscal year.
Finally, Micron's incredibly cheap valuation means that investors are getting an incredible deal on the stock right now. The chipmaker is trading at just 12 times forward earnings, and Yahoo! Finance points out that its price/earnings-to-growth ratio (PEG ratio) based on its five-year estimated earnings growth rate is just 0.17.
A PEG ratio of less than 1 means that a stock is undervalued with respect to the growth that it is expected to deliver. This makes Micron a top growth stock that investors can consider buying, as it seems set to soar higher this month, and next year as well.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
