Is Micron Stock Still a Buy After a 50% YTD Surge?
Micron Technology (MU) is benefiting from the rise of artificial intelligence (AI) and other compute-intensive technologies, which have driven demand for its high-performance memory and storage solutions higher. Thanks to AI tailwinds, shares of this semiconductor company have gained nearly 50% year-to-date.
Despite the significant run, shares of this semiconductor company still have room to climb, supported by its solid growth trajectory, new product launches, and a valuation that remains reasonable.
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As high-performance memory and storage become increasingly critical to enabling AI-driven innovation, Micron is shifting more resources to AI-focused opportunities across its portfolio. This will drive significant improvements in its top and bottom lines and expand its valuation multiples.
Notably, Micron recently posted strong Q3 financial results. In the third quarter of fiscal 2025, Micron posted record revenue from data center DRAM. The demand for its high-bandwidth memory (HBM) products and its lineup of high-capacity, low-power server DRAM modules continue to drive its revenues.
This momentum in Micron's business is likely to sustain, driven by its progress with new products. Its HBM3E ramp is on track, with full-scale shipments anticipated in fiscal Q4. The company is also preparing to launch HBM4, which will deliver improved performance compared to the previous generation and consume less power. These HBM products are likely to drive its data center revenue significantly higher in the coming quarters.
Micron has already delivered HBM4 samples to customers, and volume production is slated for 2026. Moreover, its deep relationships with major HBM customers and significant capacity investment augur well for future growth.
Beyond HBM, Micron is performing strongly in other areas as well. Its high-capacity DIMMs and low-power DRAM for servers achieved record revenue in Q3, reflecting solid year-over-year growth. Micron is also a leading provider of low-power DRAM for server use, giving it a strategic edge in the data center market.
The company also marked its third consecutive quarter of record data center SSD market share thanks to its vertically integrated solutions, which offer high performance and energy efficiency for AI workloads. Additionally, Micron is expanding its appeal in enterprise storage with high-capacity SSDs.
In the PC market, growth is expected to be modest in 2025, but Micron is positioning itself for the long term. The increasing rollout of AI-enabled PCs and the Windows 11 upgrade cycle will act as key catalysts.
The smartphone market, while growing at a slower pace, also presents opportunities. AI integration is boosting DRAM requirements per device, with more models now shipping with 12GB or more memory. Micron is catering to the premium segment with its advanced offerings, which are ideal for high-performance mobile use cases.
Micron's automotive and industrial segments are also on firm footing. The increased adoption of driver-assistance systems and AI-powered in-vehicle entertainment are pushing demand for faster, more efficient memory. Micron recently introduced a dual-channel LP5 DRAM for automotive use.
In the industrial sector, demand is rebounding as AI adoption gains momentum in areas such as factory automation. Supply constraints in legacy DRAM products are supporting price recovery and profitability.
All these factors suggest that Micron is on track to deliver record revenue, solid profitability, and strong free cash flow. It continues to invest aggressively to strengthen its leadership in AI memory solutions and is well-positioned to capitalize on the demand.
Despite the stock's 50% surge, Micron remains reasonably priced. It trades at 20.2x its forward earnings, a modest multiple considering its high earnings growth potential. Moreover, Micron's price-to-sales ratio of 5.7x also looks well-supported by its strong revenue growth trajectory.
Wall Street analysts are optimistic about Micron stock, giving it a 'Strong Buy' consensus rating. Following the YTD rally, the stock is trading near analysts' average price target of $127.48. Still, the highest price target on the Street is $172, suggesting the stock could climb another 37% from its current level.
Micron has emerged as one of the top beneficiaries of the growing spending on AI infrastructure, with strong momentum across data center and consumer markets. Its robust product pipeline, especially in high-bandwidth memory and AI-optimized storage, positions the company for continued growth. Despite a substantial 50% YTD rally, Micron's valuation remains reasonable relative to its earnings potential, making it an attractive investment.
On the date of publication, Sneha Nahata did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
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