MU Stock Overview
Micron Technology, Inc. designs, manufactures, and sells memory and storage products worldwide.
No risks detected for MU from our risk checks.
Micron Technology, Inc. Competitors
Price History & Performance
|Historical stock prices|
|Current Share Price||US$62.32|
|52 Week High||US$98.45|
|52 Week Low||US$51.40|
|1 Month Change||5.31%|
|3 Month Change||-13.35%|
|1 Year Change||-11.29%|
|3 Year Change||47.54%|
|5 Year Change||110.40%|
|Change since IPO||6,132.00%|
Recent News & Updates
Stable Fundamentals and U.S. Backing may Offset Micron's (NASDAQ:MU) Growth Revision
Micron Technology, Inc. (NASDAQ:MU) has returned to the media spotlight after the recent outlook revisions. It seems analysts are keen to call a negative financial performance trend and imply that the stock could suffer. However, in order to have the full picture, we need to compare that to the fundamentals, possible offsetting factors and the current valuation of the company.
Micron's Transition From Offense To Defense Is Not A Bad Thing
Dynamics in the PC and smartphone markets have weighed on Micron’s near-term growth prospects. Nonetheless, this opens up opportunities for Micron to enhance its distribution profile. Micron could maintain its 15% annual dividend growth rate next year, and also fulfill 20% of its indefinite buyback program ($4.32bn), due to developments with CAPEX. Forward valuations look cheap and the risk-reward on the relative strength and standalone charts look promising. How Does The Market Feel About Micron? The stock of Micron Technology, Inc. (MU), the fourth largest semiconductor entity in the world, with specializations in DRAM, NAND, and NOR, has had a poor year so far; admittedly, most of its peers haven’t done well this year either, with the iShares Semiconductor ETF (SOXX) contracting by 22%, and underperforming the broader markets by 1.8x; nonetheless, Micron has fared a lot worse, delivering negative returns of 30%. YCharts Much of the recent weakness has been on account of developments in the PC and smartphone markets where inventory levels will need to be readjusted to reflect the current reality (much of this is still expected to play out in H2-22). PC shipments which were previously poised to grow in CY22 will drop by 10% this year, whilst mobile shipments which were initially poised to witness mid-single digit growth will now come in lower by mid-single digits (there’s reason to believe it could be even worse than mid-single digits as Gartner’s recent forecast points to a 7% decline). Whilst there’s more to the DRAM and NAND stories than just the PCs and smartphone sub-plots, one can’t overlook the massive contribution of these two segments (they jointly account for almost 50% of the $161bn valued memory and storage market). It also doesn’t help that some of Micron’s enterprise OEM customers from the data center segment, have been going slow on memory and storage inventories on account of macro concerns and other non-memory component shortages. Nonetheless, Micron's management, who had previously drawn up some exciting medium-term bit demand forecasts of 15-19% for DRAM (until CY25), and levels of high 20s% for NAND (until CY25), has been recently forced to scale this down, primarily on account of the inventory resizing issues in the smartphone and PC markets. Should MU Investors Be Worried? Tweak Your Perspective Whilst the circumstances are not ideal, I still feel there’s a lot to like about the Micron Technology story if you look at it from a different lens. Firstly, Micron’s long-term goal is to transition away from PC and mobile to markets with higher growth potential and stability such as autos, industrial, and networking, not to mention data centers, which could end up as the most prominent segment in three years. The goal is to reduce the PC/mobile share from 55% of business to 38% by 2025. Perhaps these recent developments will only accelerate that shift. Secondly, think of how Micron’s distribution profile could now become a more prominent aspect of the entire story. Before I get to the distributions per se, let me just touch upon the supporting levers that could facilitate this. Given the weakness in the market, MU now intends to curb its CAPEX initiatives, particularly in WFE (Wafer Fab Equipment) manufacturing, which should help bring down the supply in the market. Just to put some numbers here, by the end of this year, Micron would have spent $12bn of CAPEX (50% of their CAPEX typically comes from WFE manufacturing alone and this is what will largely be curtailed). According to their cross-cycle financial model, under ordinary circumstances, they would spend around 35% of annual revenue on CAPEX. YCharts analyst estimates, post the recent revisions, currently point to an FY23 annual revenue figure of $29.88bn (implying ~5% annual decline), which would translate to a CAPEX figure of roughly $10.5bn. So, you’re getting a $1.5bn annual uplift in FCF, simply on account of the CAPEX curtailment. Besides that, you could have other levers. Do note that Micron isn't the only entity that has spoken of its desire to reduce supply in the market. Whilst there could be some short-term pressures, in a couple of quarters, the market balance will likely be in a much better position, which could bring the ASP (average selling prices) picture to more palatable levels (some of the other competitors in this space have also spoken of curtailing their capacity); hitherto, since FY19, the broad trajectory of NAND and DRAM ASPs, particularly the former, have been very underwhelming. Besides potentially better ASPs over time, also consider that notwithstanding the recent developments in the market, MU has been bringing through annual front-end cost reductions of high single digits in the DRAM space and low-to-mid teens in the NAND space, which are above the industry norm. Investor Day Presentation These ongoing developments should provide Micron Technology with the right foundation to inculcate greater flow through from the operating level to the operating cash flow level. Then of course you also have the inventory situation; note that this has been gradually picking up over time and will likely spike even further in Q4; inventory as a function of current assets was 22% at the end of last year, at the end of the most recent Q3, it was 25%, with $5.6bn worth of inventory on the books. After Q4, I would expect this figure to trend down quite significantly to meet the market demand (sans the support of CAPEX), which could boost the OCF even further. (as of 9M-22, inventories were the largest source of cash outflow for Micron). I recognize there are a lot of variables in play here, but I don’t believe it is unreasonable to expect an FCF boost of over $1.5bn by the end of FY23. And what is Micron’s FCF and distribution policy? Well, they give it all to shareholders. Previously this was largely related to buybacks ($876m on average, over the last five years), last year, they also introduced dividends, and most recently hiked their quarterly dividend by 15% to 0.115 per share. Some of you may be wondering if they will be able to keep this up going forward? Given what I’ve just written about the FCF dynamics, why not? If one were to assume another 15% hike next year, that would translate to a quarterly dividend of 0.132 (annual dividend of ~0.53); this would represent a dividend outflow of around $600m. That still leaves the company with at least $900m to spend on buybacks (assuming the minimum FCF benefit of $1.5bn in FY23, solely based on CAPEX curtailment and not including ASP developments, front-end cost savings, or inventory drawdowns). In fact, Micron's management is on record stating that they will engage in more opportunistic buybacks going forward, particularly when the stock trades at a greater discount to intrinsic value; considering the substantial contraction in the market-cap this year, I would imagine the buyback fervor will only ramp up from now. Just for some perspective, do note that the board of directors had authorized a $10bn indefinite share buyback program, and as of the end of May-22, there was still around $4.32bn worth of buyback ammunition yet to be spent. YCharts, Quarterly Reports, Earnings Transcripts, Author’s Calculations Closing Thoughts – Is Micron Stock A Buy, Sell, or Hold? One other underappreciated aspect of the Micron story is its current balance sheet which could come in handy during a down cycle. Around five years back, they had elevated net debt to the tune of $5.1bn, with a gross debt to adjusted EBITDA ratio of 1.1x. That situation has completely transformed over the years, and now you’re looking at a net cash position of $4.2bn with gross debt to EBITDA of only 0.4x. Crucially, cash plus investable securities amount to a whopping $11.7bn, something they can always rely on if the market remains weak for longer than expected.
Micron: Capex Control To Boost Free Cash Flow By 79%
Following Micron's recent quarterly earnings, we have revised our projections of DRAM and NAND market shipment growth lower to 13.5% and 21.5% with greater weakness in the PC and smartphone markets. In terms of Micron's profitability, we expect the transition towards next-gen process nodes with a lower cost of production per bit to support its gross margins at 47% in FY2022. We believe Micron has enough capacity to meet demand, and the lower Capex guidance boosts its 2023 free cash flow by $6.9 bln (79% increase). The end result is promising, as the lower demand is more than offset by the decreased Capex, translating to an even higher valuation for the company. Following Micron Technology, Inc.'s (MU) recent Q3 2022 earnings release, which was its record quarter across all segments with revenues growing by 16.4% YoY, the company issued updated guidance for Q4 2022. It projected revenue growth of -3% YoY, as the company cited weakness in PC and smartphone markets and changed its outlook for DRAM and NAND to grow below its long-term target in 2022. In addition, the market forecast for PC have also decreased to a forecast of -8.2% in 2022, as the actual sales in Q2 2022 declined by 15.3% YoY and the smartphone sales market forecast also decreased to -3.5% from 1% previously in 2022. Thus, we analyze the impact on Micron and update our previous revenue projections for 2022 and beyond for the company by analyzing the potential impact of the decline in the PC and smartphone market on the memory market in terms of shipment growth. Moreover, we looked into the sustainability of the company’s profitability margins as the company ramps up its 1-alpha and 176L NAND process and plans to introduce its next-gen 1-beta and 232 Layer NAND in 2022. Lastly, we examine the company’s update on its capex guidance beyond 2022, as it highlighted that it is planning to reduce WFE purchases and forecasted its capex, by analyzing its capex growth vs revenue growth to project its free cash flow ("FCF") and determine the impact on our price target based on discounted cash flow ("DCF") valuation. Lower DRAM and NAND Growth Forecasts of 13.5% and 21.5% in 2022 Trendforce, SIA, Khaveen Investments Source: Trendforce, SIA, Khaveen Investments Trendforce, Khaveen Investments Based on its Q3 FY2022 earnings briefing, Micron cited consumer demand and inventory-related headwinds impacting the industry which affects its outlook in Q4 FY2022. It also highlighted the disruption of the restrictive measures in China on the global electronics supply chain. Micron also updated its outlook for the end markets including PC which is now expected to decline by nearly 10% YoY compared to an industry and customer forecast of roughly flat calendar 2022 PC unit sales at the start of the year. In the table below, we compared the actual PC market unit sales growth with forecasts from market research firm IDC, top PC makers - Lenovo (LNVGY, [[LNVGF]]), Dell (DELL), HP (HPQ) and ASUSTeK (AKCPF, [[ASUUY]]) - analyst revenue consensus growth, and Micron’s guidance. PC Market Unit Sales Growth Q1 2022 Q2 2022 Market Forecast ('IDC') (Full year) -2.40% -8.2% Top PC Makers Guidance (Full year) 3.83% -2.13% PC Makers Analyst Revenue Consensus (Full year) 1.46% 0.60% Micron Management Guidance (Full year) 0.00% -10.00% Actual (YoY) -5.10% -15.30% Source: Micron, IDC, Company Data, Khaveen Investments According to IDC, the PC market declined by 5.1% in Q1 2022, this was below the market forecast of -2.4% in our previous analysis of AMD (AMD). Moreover, the actual decline of 5.1% in Q1 was also lower than the average guidance of top PC makers (3.83%) which expected flat to mid-single digit growth in 2022. PC makers' analyst revenue consensus of the top PC makers (1.46%) was also below the actual decline of 5.1%. Micron’s initial outlook at the start of “roughly flat” growth also was below the actual market decline. In Q2 2022, total market PC shipments declined 15.3% YoY and were worse than expected with the supply and logistics disruption in China and macroeconomic headwinds based on the IDC, which updated its 2022 forecast to -8.2%. On the other hand, the average top PC makers' guidance based on their latest earnings briefings turned from positive growth to negative (-2.13%). Additionally, the PC makers' analyst revenue consensus was also slightly lower in Q2 at 0.6% compared to 1.46%. Thus, based on the table, this indicates that market forecast, top PC makers and analyst consensus failed to accurately predict the PC market in 2022. Notwithstanding, we believe the market forecast on which we previously based our projections is the most reliable, as it was the only one to predict a decline in the PC market in 2022. Thus, we continue to base our projections on the market forecast of -8.2% in 2022. PC DRAM and NAND Growth 2021 2022F 2023F 2024F 2025F Unit Sales ('mln') 342 314 325 336 348 Growth Rate 10.65% -8.20% 3.50% 3.50% 3.50% PC DRAM Content Growth % 11.63% 11.63% 11.63% 11.63% 11.63% Total PC DRAM Growth % 24% 2% 16% 16% 16% PC NAND Content Growth 21.60% 21.60% 21.60% 21.60% 21.60% Total PC NAND Growth % 35% 12% 26% 26% 26% Source: Khaveen Investments Moreover, in the smartphone market, in our previous analysis of QUALCOMM (QCOM), we highlighted that the market had declined by 11% YoY in Q1 2022 and was forecasted by Strategy Analytics for a full-year decline of 1%. Though, the latest forecast by IDC shows a larger forecasted decline of 3.5% in 2022 but with a positive long-term CAGR of 1.6% through 2026. Furthermore, Micron’s outlook had changed for total market shipments to decline by mid-single-digits percent in 2022 below earlier expectations of mid-single-digit growth. However, Micron also highlighted the content growth across the PC sector, with the shift towards enterprise PCs and new architectures as well as higher DRAM and NAND content driven by the shift to 5G. Smartphone DRAM and NAND Growth 2021 2022F 2023F 2024F 2025F 2026F Unit sales ('mln') 1,352 1,335 1,341 1,348 1,355 1,362 Change % 5% -3.5% 1.9% 1.9% 1.9% 1.9% Smartphone DRAM Content Growth % 18.60% 18.60% 18.60% 18.60% 18.60% 18.60% Total Smartphone DRAM Growth % 24% 14% 21% 21% 21% 21% Smartphone NAND Content Growth % 26.6% 26.6% 26.6% 26.6% 26.6% 26.6% Total Smartphone NAND Growth % 32% 22% 29% 29% 29% 29% Source: Khaveen Investments Notwithstanding the slowdown in PC and smartphone markets, Micron also highlighted its positive long-term growth driven by data center, auto, and industrial markets. We summarized our long-term projections of the DRAM and NAND market breakdown by end market applications, where we expect the share of the data center (ICT infrastructure) and automotive market segments to rise, while mobile phone and PC shares gradually decline. Trendforce, SIA, Khaveen Investments Trendforce, SIA, Khaveen Investments DRAM Growth 2022F 2023F 2024F 2025F Mobile Phones 14.4% 20.9% 20.9% 20.9% Consumer Electronics 4.5% 4.5% 4.5% 4.5% PCs 2.5% 15.5% 15.5% 15.5% ICT Infrastructure 24% 25% 24% 25% Industrials 1.70% 1.70% 1.70% 1.70% Automotive 34% 32% 32% 32% Total DRAM Shipment Growth % 13.5% 18.5% 18.1% 18.3% NAND Growth 2022F 2023F 2024F 2025F Mobile Phones 22.2% 29.0% 29.0% 29.0% Consumer Electronics 4.5% 4.5% 4.5% 4.5% PCs 12% 26% 26% 26% ICT Infrastructure 24.2% 25.1% 23.9% 24.5% Industrials 1.70% 1.70% 1.70% 1.70% Automotive 85.6% 91.1% 84.5% 59.9% Total NAND Shipment Growth % 21.5% 26.2% 25.4% 23.7% Source: Khaveen Investments Overall, we expect DRAM and NAND market shipment growth in 2022 to slow down to 13.5% and 21.5%, respectively, weighed down by the PC and smartphone market growth slowdown. This is compared to our previous analysis of Micron, where we projected the long-term DRAM and NAND market growth at 18.1% and 28% respectively in 2022. Notwithstanding, over the long run, we anticipate the share of smartphone and PC markets of the total market to decline from a combined 50% to 49% ('DRAM') and from 37% to 34% ('NAND') by 2025, as we believe the growth to be driven by higher growth data center and automotive markets. Sustainability of Margins Supported by Transition to Higher Nodes In Q3 FY2022, Micron’s gross margin was 47.4% and decreased by 40 basis points with an increasing mix of NAND according to management. In Q4, management guided gross margins to further decline to a range of 42.5% plus or minus 150 basis points. Micron also guided its revenue to decline by 3% YoY in Q4 2022. Thus, the lower margin guidance is unsurprising with lower economies of scale. That said, its guided margin is still higher than its 1-year, 3-year and 10-year average but lower than its 5-year average gross margin. Micron Gross Margins Current (Q3 2022) 47.4% 1-year average 37.8% 3-year average 38.0% 5-year average 42.9% 10-year average 33.3% Source: Micron, Khaveen Investments Though, Micron’s management continues to expect margin improvement driven by “the ramp of its 1-alpha DRAM and 176-layer NAND nodes.” Based on its annual report, the company incurs costs related to product and process technology including costs to acquire product and process technologies and patents. According to GlobalData, Micron’s total patent publications increased by 114% in the past 10 years from 3,568 in 2012 to 7,623 in 2021. Micron highlighted that its 1-alpha node ramp is several quarters ahead of the industry while its 1-beta node is on track to ramp in manufacturing by the end of calendar 2022 for DRAM. Whereas for NAND, the company highlighted its industry-leading 176-layer node growing in its mix of sales reaching the majority of bit shipments and contributing to a competitive cost structure. The company also claims to be making progress on its next 232-layer node and expects to ramp production by the end of calendar 2022. Micron claims that its 1-alpha DRAM node has a 40% improvement in memory density compared to its 1-z node and 15% power savings. Bit density is the number of bits that can be stored within a given memory or storage area according to PCMag. The most important thing now is that if they’re getting 40% more gigabytes per wafer that basically sets them up to be that much more profitable than the next guy making DRAM. - Jim Handy, principal analyst with Objective Analysis SK Hynix Factors 16Gb/chip 64Gb/Chip % Difference Bit density 16Gb 64Gb 300% Cost of production per bit $0.25x10^-9 $0.09x10^-9 -64% Cost per chip $0.25*10^-9/bit $0.36*10^-9/bit 44% Chip price (ASP) 4 6 50%
Investors Will Want Micron Technology's (NASDAQ:MU) Growth In ROCE To Persist
If you're looking for a multi-bagger, there's a few things to keep an eye out for. One common approach is to try and...
Micron: Destruction Of Demand - Delicate Balancing Act Ahead
The destruction of demand for the PC and smartphone markets is real, given Micron Technology's softer FQ4'22 guidance. Despite so, MU stock price has recovered by 16.3% post FQ3'22 earnings call, due to the impending passing of the Chips Act. It remains to be seen if Micron will really benefit, since the company has yet to formally announce its US expansion plans, though there is some provision for tax credits. For now, MU is more or less on the balancing bar, given the temporary headwinds potentially impacting its improved profitability thus far. Investment Thesis Micron Technology, Inc. (MU) has proven to be capable for its FQ3'22 execution, given the improving financial performance thus far. This is attributed to the robust growth in its data center, auto, and industrial segments. Nonetheless, given the obvious softening demand for the PC and smartphone segments, as previously reported by analysts covering Intel (INTC), Qualcomm (QCOM), and AMD (AMD), we applaud MU's quick response to its supply chain reduction moving forward. Thereby, highlighting the company's highly competent management team in preserving its margins and profitability ahead. Moving forward, given the drastic moderation in its revenues due to the slowing demand, we expect the MU stock to continue underperforming in the intermediate term. In contrast, those looking for a quick lift may be happy to see the MU stock performing well, due to the impending passing of the Chips for America Act. We expect to see a trickling down effect over the next few years, potentially aiding the industry to improve the US production capacity over time. Nonetheless, since the Chips Act could possibly be only a one-time investment from the US government, it truly remains to be seen if the semiconductors industry as a whole could grow meaningfully for this and the next decade, to compete with China's existing production prowess. We shall see, since MU has yet to formally announce the expansion of its US manufacturing as well, unlike INTC and TSMC (TSM). Therefore, speculatively indicating a short-term stock lift, before possibly digested by the rising inflation and potential recession. Micron Performed Beautifully In FQ3'22, Despite The Gloomy Guidance S&P Capital IQ For its latest quarter, MU has performed relatively well, with revenues of $8.64B and gross margins of 46.7%, indicating a YoY increase of 16.4% and 4.6 percentage points, respectively. Its profitability improved as well, with net incomes of $2.63B and net income margins of 30.4%, representing YoY growth of 51.1% and 7 percentage points, respectively. S&P Capital IQ Therefore, it is no wonder that MU reported excellent Free Cash Flow ((FCF)) generation in FQ3'22 as well, with an FCF of $1.26B and an FCF margin of 14.6%. Thereby, contributing to the company's growing cash and equivalents on its balance sheet to $9.26B at the same time. Exemplary execution, despite the ongoing supply chain issues and rising inflation. S&P Capital IQ In addition, MU continued to be prudent with its operating expenses, with a total of $1.04B reported in FQ2'22, representing an increase of 11.8% YoY. Nonetheless, as the ratio to its growing revenue remains sequentially lower at 12.07% for FQ3'22, we are not overly concerned at the moment, since MU continues to invest a good $0.77B in its R&D efforts then. In addition to ensuring the company's competitiveness in the future, the investment would eventually be accretive to the company's top and bottom lines. S&P Capital IQ In addition, MU kept its reliance on long-term debts relatively steady with $6.03B reported in FQ3'22, in line with historical levels, despite its growing net PPE assets of $37.36B and capital expenditure of $2.58B at the same time. Therefore, indicating the company's competent capital management thus far. In addition, with MU management dialing down their expenses for the next five quarters, we still expect to see a decent net income and FCF profitability ahead. S&P Capital IQ Since our previous analysis, MU's projected revenue and net income profitability have unfortunately been massively downgraded, which seems rather alarming for its future stock performance. For FY2022, its revenue and net income profitability are estimated to come at $30.42B and $9.41B, indicating a moderation of -9.4% and -13.3% since previous estimates in June 2022, respectively. In addition, consensus estimates expect FY2023 revenues and net incomes to be $29.49B and $7.14B, instead of the previous June estimates of $39.96B and $14.19B, representing a massive headwind worth $10.47B and $7.05B. It is a wonder that the stock had not tanked, as witnessed by Nvidia (NVDA) with a -15.1% stock decline in the days after its FQ2'23 earnings call. In the meantime, we encourage you to read our previous article on MU, which would help you better understand its position and market opportunities.
|MU||US Semiconductor||US Market|
Return vs Industry: MU underperformed the US Semiconductor industry which returned -8.1% over the past year.
Return vs Market: MU matched the US Market which returned -11.6% over the past year.
|MU Average Weekly Movement||6.9%|
|Semiconductor Industry Average Movement||8.9%|
|Market Average Movement||7.8%|
|10% most volatile stocks in US Market||16.9%|
|10% least volatile stocks in US Market||3.2%|
Stable Share Price: MU is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 7% a week.
Volatility Over Time: MU's weekly volatility (7%) has been stable over the past year.
About the Company
Micron Technology, Inc. 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. It provides memory and storage technologies comprises DRAM products, which are dynamic random access memory semiconductor devices with low latency that provide high-speed data retrieval; NAND products that are non-volatile and re-writeable semiconductor storage devices; and NOR memory products, which are non-volatile re-writable semiconductor memory devices that provide fast read speeds under the Micron and Crucial brands, as well as through private labels.
Micron Technology, Inc. Fundamentals Summary
|MU fundamental statistics|
Is MU overvalued?See Fair Value and valuation analysis
Earnings & Revenue
|MU income statement (TTM)|
|Cost of Revenue||US$17.20b|
Last Reported Earnings
Jun 02, 2022
Next Earnings Date
|Earnings per share (EPS)||8.99|
|Net Profit Margin||30.61%|
How did MU perform over the long term?See historical performance and comparison