Opinions
Kim Bolton
Micron Technology
MU-Q
SELL
Oct 23, 2024
Stock price when the opinion was issued
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Micron Technology, Inc. engages in the provision of innovative memory and storage solutions. It operates through the following segments: Compute and Networking Business Unit (CNBU), Mobile Business Unit (MBU), Embedded Business Unit (EBU), and Storage Business Unit (SBU). The CNBU segment includes memory products and solutions sold into client, cloud server, enterprise, graphics, and networking markets. Social media mentions are up 119% in the past 24h.
Impacted not only by tariff rhetoric, but also because it's a very cyclical business. 12-month price target of $118.50, but with a lot of volatility in between. If you're underwater right now, write some calls; if it starts to approach the strike price, and you don't want to get called away, just roll the strike price up.
Hyper-cyclical earnings. Storage and memory chips, which are like a commodity and so you have big swings. Consensus is for earnings to grow over 400% this year, not because of innovation but because of the demand cycle. Go back 10 years and this name has generated a total compound return of 10%, which is less than the S&P. Beta is 1.9.
When ASML reported its disappointing memory-chip earnings, he sold this one as a result. This business is so very cyclical; once sold off, takes anywhere from 2-6 quarters to come back.
ASML also talked about how China has built out facilities for memory chips. So, another supply of memory chips that will influence cyclicality in the space.