Micron Technology, Inc.

MU Details

Micron Technology, Inc. (NASDAQ: MU) is a provider of memory and storage solutions. The Company's product portfolio includes dynamic random-access memory (DRAM), negative-AND (NAND), three-dimensional (3D) XPoint memory, and NOR, solid-state drives, graphics and high bandwidth memory (HBM), managed NAND and multichip packages.

Financial Results

• The company has announced results for the Q2 of fiscal year 2023, which ended March 2, 2023. It reported revenues of $3.69 Bn as compared to $4.09 Bn for the prior quarter as well as $7.79 Bn for the same period of the last year.
• Notably, customer inventories are getting better, and the company is expecting gradual improvements to the industry’s supply-demand balance.
• MU’s operating cash flow amounted to $343 Mn as compared to $943 Mn for the prior quarter and $3.63 Bn for the same period of the last year.
• The company closed Q2 of 2023 with cash, marketable investments, and restricted cash of $12.12 Bn.

Outlook

The company is confident in the long-term demand as well as it is deploying prudently in order to preserve the technology as well as product portfolio competitiveness. For Q3 FY 2023 (GAAP outlook), the company is expecting revenue of $3.70 billion (± $200 million).

Key Risks

Volatility in the average selling prices of the products, the highly competitive nature of the industry, etc. are some of the risks MU is exposed to.

Fundamental Valuation

EV/Sales Multiple Based Valuation

Stock Recommendation

The stock has been valued using EV/Sales multiple-based illustrative relative valuation and the target price so arrived reflects a decline of low double-digit (in % terms). A slight discount has been applied to EV/Sales multiple-based (NTM) (Peer Average) considering higher competition, geopolitical risks, etc.  

Hence, considering the target level attainment, resistance around the current trading levels, macro-economic uncertainties hovering around the broader market on the back of rising inflationary pressure and increasing cost of capital, a ‘Sell’ rating is assigned to “MU” stock at the current market price of USD 63.70 (as of March 30, 2023) at 07:01 AM PST.

Technical Overview:

Markets are trading in a highly volatile zone currently due to certain macroeconomic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for share price chart is based on 30 March 2023. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Disclaimer

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