1 top 40% growth stock that could start skyrocketing after September 25th

Memory demand is up in 2024 as semiconductor companies, smartphone original equipment manufacturers (OEMs) and personal computer (PC) manufacturers look to get their hands on compute and storage memory chips to produce more processors. artificial intelligence (AI), generative AI. smartphones and PCs with AI.

As a result, the top and bottom lines of Micron technology (NASDAQ: MU) they are now growing at an astonishing rate. However, the same cannot be said for the stock. Shares of Micron hit a 52-week high on June 18, but have fallen 40% since then despite excellent financial results. The stock’s slide over the past three months can be attributed to general negativity in the semiconductor space — PHLX Semiconductor Sector the index fell by 16% during this period.

The sector has been hit by several headwinds, including potential trade restrictions on shipping equipment to China, uncertainty surrounding the US election and concerns about the health of the US economy. Despite the perceived headwinds, quarterly results for other key semiconductor companies such as Nvidia, Marvell technologyand Broadcom they have been solid of late and exceeded Wall Street’s already high expectations.

It won’t be surprising to see Micron Technology follow in the footsteps of its peers when it releases its fiscal fourth quarter 2024 results on September 25. Let’s look at the reasons why.

The health of the memory market could help Micron Technology deliver splendid results

According to market research firm TrendForce, Dynamic Random Access Memory (DRAM) industry revenue grew 25% quarter-on-quarter in the second quarter of calendar 2024. TrendForce adds that all industry players, including Micron, witnessed growth of deliveries during the quarter. . More importantly, the average selling price (ASP) of DRAM also increased as demand outstripped supply.

Micron Technology estimated revenue of $7.6 billion for the fiscal fourth quarter (which ended in August). That would translate into a sequential jump of 12%. However, TrendForce’s estimate that the DRAM industry grew at a much faster pace than on a sequential basis suggests that Micron could deliver stronger growth when it releases its results later this month.

On a year-over-year basis, Micron’s revenue guidance points to 90% growth. The company’s adjusted earnings estimate of $1.08 per share would be a huge improvement over the $1.07 per share loss it suffered in the same quarter last year. However, we have already seen that Micron could beat its guidance due to stronger growth expected in the DRAM industry.

The story continues

On the other hand, TrendForce points out that the price of NAND flash storage memory continued to rise in the second quarter of 2024, leading to a 14% sequential jump in revenue. The good news for Micron investors is that memory prices are expected to rise in the third quarter as well. More specifically, an 8% to 13% increase in DRAM prices is expected in the current quarter. Meanwhile, NAND flash average selling prices are likely to rise 5% to 10% quarter-on-quarter in Q3.

So Micron looks set to deliver healthy guidance as well as solid results this month. Analysts expect the company’s revenue in the first quarter of fiscal 2025 (which just started) to reach $8.55 billion, which would be a sequential increase of 12.5% ​​from the previous quarter. The potential increase in DRAM and NAND flash prices indicates that Micron’s guidance may indeed be as strong as analysts expect.

The valuation makes buying this chip stock a problem ahead of its quarterly results

Micron Technology’s significant pullback over the past three months is why it’s trading at a very attractive 4.5 times sales and 10 times forward earnings. Given the high levels of growth this semiconductor stock offers, buying it at its current valuation is an opportunity investors shouldn’t miss, especially given how quickly its earnings are projected to grow in the next two years.

Even better, Micron could sustain its healthy growth for longer, as the global memory market is expected to generate $360 billion in revenue in 2029, compared to $136 billion in 2022, according to Fortune Business Insights. So investors are getting a lot of stock that could not only deliver impressive short-term growth, but also remain a solid long-term bet thanks to the memory industry’s favorable outlook.

That’s why they’d do well to buy Micron shares while they’re trading at attractive levels, as a potential quarterly beat-and-raise report on September 25 could spark a run.

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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 recommends Broadcom and Marvell Technology. The Motley Fool has a disclosure policy.

Prediction: 1 40% Down Growth Stock That Could Start Skyrocketing After September 25th was originally published by The Motley Fool