저자: ParkevTatevosian,CFA · 외국인
요약 보기
관세 발표 후 마이크론이 52주 저점 부근(약 $64.72)까지 16% 이상 급락. 미국·일본·대만·싱가포르·중국 등 해외 생산으로 매출원가 상승 우려, 다만 미국 뉴욕·아이다호 투자 확대가 관세 상쇄 요인. AI 데이터센터·스마트폰 고가화로 수요는 견조하나 관세로 최종 수요 타격 가능성. 선행 PER 5.8배로 역사적 최저 밸류에이션, DCF 적정가 $154 제시. 리스크 할인을 높여도 저평가 판단, 매수 의견 유지.
다듬은 글
Micron Technologies stock price fell by more than 16% after the announcements by President Donald Trump implementing tariffs on the United States trading partners. Now, Micron Technology has operations of course in the United States, but it also has operations in Japan, Taiwan, Singapore, and China.
So, these tariffs are going to increase its cost of goods sold. Thankfully, Micron has made major investments in the United States with more coming on board over these next few years. Specific expansions in New York and Idaho are going to help the company offset some of these tariffs if they remain in place longer term.
It's time to revisit Micron stock, look at the company's prospects, compare it against the new lower valuation, and give my updated recommendation for Micron stock, whether it's a buy, hold, or a sell. Following these announcement, Micron's stock price decrease has it now trading at close to its 52- week low at $64.72.
That's significantly lower than where it started the year at about $90 a share. Of course, I'm extra disappointed in that because I've had Micron stock rated as a buy all year long. So, this is a significantly underperforming investment on my list of recommended stocks to buy. But am I changing that recommendation here?
Let's get a deeper look at the company's performance. Over the last decade, Micron Technology, you can see the cyclicality of the business. Revenue goes up and down every couple of years based on the semiconductor cycle. This most recent cycle is no different, but it's just getting started. At $31 billion in trailing 12-month revenue, Micron's management has forecasted strong revenue growth for 2025.
Now, as a result of the tariffs, that revenue expectation is likely to be lowered. By how much, that remains to be seen. Micron plays a big role in Nvidia's expansion in the data centers optimized for AI. Micron is a partner with Nvidia playing a role providing memory and storage for these data centers optimized for AI.
Additionally, Micron is benefiting as consumer electronics are getting embedded with increasing technology to facilitate those advancements in artificial intelligence. Phones are getting embedded with more memory and more storage. Laptops, personal computers, cars, etc., etc. So all of these devices, all of these electronics are getting embedded with more technology, which is great news, not just for Micron, but for the industry overall.
And then people have been spending money on those products that have been optimized for AI. I've seen several reports coming out of large smartphone sellers saying that consumers while they're buying the same amount of smartphones, the overall industry unit growth, it's flat, but people are opting for higher priced smartphones that have more technology embedded.
So, people like these new AI features and they're paying up so that their phones have those capabilities embedded. So people are paying for that and that's been good news for Micron. The company saying that it's been able to sell more units of its technology at higher average selling prices. So organic demand for its products were increasing and increasing at an accelerating rate.
These tariffs are going to hurt that demand most likely. By how much is what remains to be seen. Now, Micron Technology had an excellent cash flow from operations to sales ratio over the trailing 12-month period. It was rebounding strongly at 42% in the most recent period. It was moving higher as the semiconductor cycle continued expanding which excluding the tariffs, it was expected to continue for at least another year in that the replacement cycle for personal computers and laptops was just getting underway.
phones. Smartphones were expected to grow by low to mid single digits this year, but also the average selling price in smartphones was expected to increase as a result of the increase in technology. And then of course you had the big boom in hich is likely to continue at least for the next several years.
Even with the increased costs of goods, the industry is likely to continue growing. Maybe the growth rate will slow down a little bit, but the industry is still likely to continue growing given the insatiable demand we're seeing for artificial intelligence. And companies like Open AI are saying that chat GPT is reaching its limits in what it can serve.
demand is soaring so much that it barely has enough capacity to serve that demand. So it needs to keep investing to expand its capacity to serve those customer needs. Now even if those costs are higher by 20 by 40% it's not likely to stop the growth in the AI industry but it is likely to slow it down.
Micron's returns on investor capital were also rebounding as a result of the increase in demand, increase in revenue, increase in profits. The company had invested significantly was saying that those investments were working well that the initial response from their customers was more positive than they were expecting.
So their ability to invest in the latest technology and keep demand for its products and stay on the cutting edge has been strong over the past decade. Now the recovery was just underway and these tariffs threaten that recovery. Micron Technology may or may not continue improving the return on investor capital in the near term, but longer term, the company's demonstrated an ability to manufacture and sell and research and develop and design these semiconductors in a profitable way that has generated significant returns for shareholders for very many years.
Now, let's get to valuation. Micron was already undervalued coming into these tariffs in my opinion. That's why I had the stock rated as a buy. I saw all those positives and the valuation was relatively cheap at a forward PE uh for most of the year at less than 10. Now Micron is trading at a forward PE of 5.8.
This is the lowest valuation this stock has traded for for as long as I can remember. I don't think Micron stock has ever traded at this low of a valuation before. Now, of course, I don't think Micron has ever faced as much risk as it faces today with the increasing tariffs and not just how it's going to impact its cost of goods sold, but also how it's going to impact the end consumer markets.
How is demand going to look like for the products that Micron is selling? Are they going to see fewer orders of its products because the end consumer demand is going to fall off a cliff as a result of electronic devices now having uh an increase in price of several hundred or 20 30 40 50% maybe in many cases when you're buying an iPhone, an iPad, a laptop, a computer, etc.
But the valuation is extremely cheap as a result of those risks already. And I just updated today my discounted cash flow model for Micron. And I had a couple of adjustments. Uh one of the adjustments I made was to decrease the free cash flow expectations over the next few years. I lowered those free cash flow expectations as a result of the tariffs, as a result of what I think is going to be a decrease in consumer purchases of units of end market demand for these products.
But I also decreased the risk-free rate because the previous time I had done this model for Micron, the company had uh the 10-year bond rate was over 4.5%. So because of lower bond yields, the cost of capital has decreased for Micron Technology. So I decreased the risk-free rate. I also adjusted the capital structure.
Now, because the market cap has fallen so much, the company's debt makes a larger percentage of its capital structure at 11.34 billion in debt on 72 billion in market cap. So, the result of those gives and takes here has Micron's intrinsic value at $154 a share. The current market price at $64 a share signals that this stock is significantly undervalued.
Now, I've accounted for the increase in risk by increasing my margin of safety right now during this tumultuous period where there are so many uncertainties. I previously would have a margin of safety between 5 and 15%. I think I'm going to raise my margin of safety during these times to about 10 to 20 to 25%.
So even if I see a business is undervalued by 10 or 15%, I'm not going to jump to a conclusion and say it's undervalued as aggressively as before. But given the wide disparity here in intrinsic value compared to the market price, I can comfortably say that Micron stock is undervalued even given the heightened risk and the heightened uncertainty.
So I will update my recommendation and let everyone know that I still think Micron stock is a buy at current price level. It's a great place to connect with me directly, engage with like-minded investors, and learn more and take your investing to the next level. Spots are limited, so join now before it's too late.
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