Should You Buy Micron Stock on the Dip? | MU Stock Analysis

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마이크론 실적은 AI 데이터센터 수요로 매출 급증(분기 6.81B, 전년比 약 82%↑)과 매출총이익률 26.9%로 양호했으나, 매출의 약 33%를 설비투자에 쓰는 대규모 CAPEX 부담과 미국 공장 투자 위험으로 주가가 하락. 다음 분기 매출 7.6B·매출총이익률 33.5% 가이던스 제시, 선행 PER 13.89로 합리적 밸류에이션. 마이크론을 2024년 상위 매수 종목 리스트에 유지.

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01. hey everyone Micron Technology reported quarterly Financial results that sent the stock price down following the release so I'll share with you the reasons why the stock price fell pointing to the quarterly earnings release highlighting specifically the factors that investors did not like I'll also highlight the good things from micron's latest quarter the progress the company made the imbalance between supply and demand in the industry is working in its favor and I'll elaborate on those factors in the video finally I'll update you on my recommendation of had the stock rated as one of my top stocks to buy in 2024 am I changing that recommendation you'll find out in this video so let's jump into the result right off the bat Micron management saying that AI demand drove 50% increase in sequential data center revenue and record high data center Revenue mix so Micron Technology is now getting into the mix of this surge in demand for artificial intelligence and data center growth and data center invest investment is absolutely soaring that's what's driving growth for NVIDIA it's position inside the data center the AI Data Center and now Micron Technology yet another business benefiting from that growth in data centers now within that data center there is several products and several companies that are benefiting from that expansion it's not just Nvidia there's more to a data center than just gpus you need me memory you need storage and that's where Micron comes in now the spending where is the money coming from to build these data data centers that's coming from the likes of Amazon alphabet Microsoft Oracle and other big cloud providers that are building out these data centers for their own use and to sell it to other businesses they are the ones that's driving the big surge in spending in data center to train and develop these large language models and they are getting paid from companies like open AIS chat GPT and others that are using the computing power of those data centers and given the forecasts of investments from all those hyperscalers this growth in data center is likely to continue for at least the next 2 to four years that's the timeline that these hyperscalers forgot to mention meta platforms is also investing big into Data Centers to develop its large language model and so they've informed investors that they will increase their spending on data centers by the billions and they've said that these investments will go on for a couple of years the company continues to say that robust AI demand and strong execution enabled micron to drive 177% sequential Revenue growth the year-over-year revenue growth was even larger and this exceeded their guidance range for fiscal Q3 so they beat expectations they are gaining share in high margin products like high bandwidth memory and they are excited about the expanding AI driven opportunities ahead and are fiscal year 2025 so this all sounds great why was the stock price down and it has a connection to the robust demand it has connection to the growth expectations and I'll Circle back to that before I end the video in a little bit I highlighted that year-over-year Revenue was even stronger you can see here 6.81 one billion in revenue for fiscal Q3 2024 that's compared to just 3.75 2 billion in fiscal Q3 2023 so big surge in Revenue remember a few quarters ago I was talking about Micron just rebounding from that cyclical bottom in a demand and now it's shaping to recover from that bottom it's a cyclical business there are ups and downs and it's down in the middle of the big upswing and that upswing is being turbocharged by investments in artificial intelligence so micron's prospects are excellent It's profit margin the gross profit margin expanded to 26.9% up from -1 17.8% in the next quarter management said it expects its gross profit margin to continue expanding going forward again more good news why is the stock price falling so operating income percentage jumped to 10.6% up from 46.9% in the previous quar in the previous year same quarter all right so that was all the good news and here is where the bad news starts investments in capital expenditure 2.06 billion for the third quarter of 2024 so if you divide that by sales that's roughly almost a third of sales almost 33% of sales going into capital expenditure that's a large percentage of sales that you're investing in capital expenditure remember what capital expenditure is it's investments in expansion of manufacturing for Micron Technology specifically Micron is investing in expansion in the US and that investment is facilitated by two things number one the growing demand environment as you noticed earlier demand for its products are increasing because of demand from artificial intelligence and the impact AI is having across the board we didn't get into the edge right we just talked about data center for now but on the edge products like smartphones and computers they're all going to require increasing memory and increasing storage because of the increasing Computing requirements for artificial intelligence so that's all going to drive demand for micron and Micron is invested to meet that demand and those Investments are large and not only did Micron say that 2 billion in Q3 that the next quarter is going to be even more at 3 billion and then next year is going to be even more than that and remain at roughly 30% of Revenue so those large Capital Investments are what spooked investors in these latest quarterly results investors were hoping that Micron would be able to serve the growing demand of this Market with existing capacity or if it was going to need to invest in increasing capacity to not have it be so large so that was the first reason why Micron is investing in expansion the second reason is the chips act in the US is granting Micron close to6 billion dollar in Grants so that it can invest in manufacturing in the US it's investing in expansions in Idaho and New York and Micron sees that as an opportunity to expand at lower prices and it Dr risks from its existing manufacturing footprint in Taiwan an area with increasing geopolitical risk so for those two reasons the company is investing in capital expenditure investing in manufacturing and that's risky because you're putting in billions and billions of dollars and it's uncertain if you're going to get that return on investment that you're expecting going into it of course they wouldn't do it unless they were expecting that good return on investment but it's never a sure thing it increases risk of a business the more Capital you pour into the business however the good sign is that the government is supplementing ing some of those Investments and so the costs are lower the risks are lower and one of the factors of the geopolitical tension is that micron's business is now at greater risk because of the concentration in manufacturing in Taiwan by investing in expansion in the US it der risks from geopolitical tension but it increases risk because the business is now more Capital intensive increas ing its fixed cost its fixed asset base so a bit of offsetting but investors uh placing a greater weight on the greater fixed capital investment portion and less weight on the decreasing geopolitical risk part of the investment so this is the primary reason why I feel the company's stock price fell following a quarterly earnings update which for the most part looked really strong to me the area of concern was what I just discussed here looking ahead the company expects 7.6 billion in Revenue in the next quarter and margins gross profit margin of 33.5% these would be increases from 6.8 billion in revenue from the previous quarter so an 800 million increase in revenue and roughly 7 percentage points increasing from the gross profit margin of 26.9% % to 33.5% so excellent news there now following the stock price decrease Micron Technology is now trading at a forward price to earnings of 13.89 which in my opinion is a reasonable valuation so to update my recommendation for f uh not Fiverr for Micron Technology I'm keeping Micron on my list of top stocks to buy and I'm updating that recommendation today on July 2nd