Promotions Micron technology 09.30 NASDAQ: MU rose 12.1% this week towards the end of trading on Thursday, according to office data provided on S&P Global Market Intelligence is a very good indicator for a memory chip manufacturer in an unstable technology market.
The reasons for Micron’s growth were not related to any of the company’s ads, as there really weren’t any this week. However, a strong revenue season for many other technology companies has fueled optimism about economic growth and digital applications. In addition, a problem at a competitor’s NAND-flash memory enterprise helped Micron face a downturn in markets on Thursday when the tech sector shook with a hotter-than-expected inflation report.
Over the past few months, the technology sector has been shaken by fears of inflation and rising interest rates. Micron has actually outperformed the sector since November, as Micron is a stock price with a low P / E ratio. Thus, it is assumed that the growth of rates will be less affected by the growth of shares than the growth of shares, the profits of which are far from future. In addition, because Micron sells memory chips similar to commodities, prices of which depend on supply and demand, it can benefit from inflation, especially in the memory market.
However, Micron sold out in January as crescendo sales in the markets began to affect all stocks. Some investors may also have begun to fear that the Federal Reserve may over-strengthen the economy amid high inflation and thus push the economy into recession. So even cheap cyclical stocks, such as Micron, began to sell off because of this new uncertainty, and Micron came out for the week well above its 52-week highs.
However, while Micron hasn’t reported earnings for another couple of months, many technology stocks have been reported recently, and earnings overall have been good, with a few exceptions. Notably, most semiconductor companies continue to report declining revenues and profits despite supply constraints, and many companies involved in enterprise software and cloud computing are also reporting good results. These non-hardware companies are still dependent on semiconductors, memory and storage for work, so the boom in results for digital-focused companies is likely to fuel Micron’s optimism.
However, even though markets were gripped by fears of inflation on Thursday, Micron was a little lucky when a major competitor reported contamination of two production sites for NAND flash memory production. If these NAND bits are disabled indefinitely, prices for NAND flash memory should rise soon. Micron is a leader in 3D NAND and earns about a quarter of its revenue from NAND sales, so it will benefit soon.
Despite steady recent results, Micron still looks like a value these days, only 10 times more than this year’s revenue estimate and about eight times next year’s revenue estimate.
Micron’s historical volatility has forced it to trade at a low, but this time it could be different. Last summer, for the first time in the modern era, management established small dividends, a testament to the belief that Micron should remain profitable at all stages of the cycle. In addition, Micron is now a technology leader in the industry as the first memory manufacturer to mass-produce 1-alpha DRAM chips and 176-layer NAND.
So while stocks have spent a good week and are trading close to historic highs, increasing the digitization of the economy should lead to strong results for Micron. I don’t see it slowing down any time soon, so stocks still look attractive, even at these elevated levels.
This article reflects the opinion of a writer who may disagree with the “official” recommendation position of the premium Motley Fool Advisory Service. We are motley! Challenging the thesis of investing – even one of our own – helps all of us think critically about investing and making decisions that will help us become smarter, happier and richer.