Micron Stock Before Q2 Earnings: A Smart Buy or Risky Investment?

Micron Technology, Inc. MU is slated to report second-quarter fiscal 2025 results on March 20, after market close.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.The company projects fiscal second-quarter revenues to be $7.9 billion (+/- $200 million). The Zacks Consensus Estimate for the top line is pegged at $7.9 billion, which implies year-over-year growth of 35.6%.Meanwhile, Micron estimates adjusted earnings of $1.43 (+/-10 cents). The consensus mark for the bottom line has remained unchanged at $1.43 per share over the past 60 days, which indicates a year-over-year improvement of 240.5%.Image Source: Zacks Investment ResearchThe company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 72.3%.Micron Technology, Inc. Stock Price and EPS Surprise Micron Technology, Inc. price-eps-surprise | Micron Technology, Inc. QuoteEarnings Whispers for MicronOur proven model does not conclusively predict an earnings beat for Micron this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.MU carries a Zacks Rank #4 (Sell) and has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.Factors to Note Ahead of Micron’s Q2 ResultsMicron’s second-quarter results are poised to reflect a significant boost from the growing demand for memory chips, fueled by the increasing adoption of GPU-enabled artificial intelligence (AI) servers. As data center operators expand their infrastructure to support generative AI and large language models, memory chips have become essential components. This surge in demand for AI-driven technologies is likely to have bolstered Micron’s revenues during the quarter under review.Another positive factor is the improving supply-demand dynamics in the memory chip market. For several quarters, Micron faced headwinds from excess inventory across various sectors, which heavily impacted its financial results. However, conditions have improved over the past year, which has resulted in improvements in prices for its core products — DRAM and NAND chips.According to the Zacks Consensus Estimate, DRAM revenues for the second quarter are expected to hit $6.2 billion, marking impressive 32.2% year-over-year growth. Similarly, NAND revenues are projected at $1.6 billion, implying a 2.4% increase from the same period last year. These figures highlight Micron’s ability to capitalize on favorable market trends.However, Micron’s profitability is likely to have been negatively impacted by a shift toward lower-priced consumer products and underutilization of NAND production capacity. Moreover, inflationary pressures and macroeconomic uncertainties have dampened consumer spending, likely reducing demand for memory chips in key markets, such as smartphones and personal computers.Additionally, Micron’s heavy reliance on China poses a risk amid ongoing U.S.-China trade tensions. Margins may also feel the strain from a higher mix of lower-margin NAND products and limited cost-saving progress in manufacturing processes.Micron Stock Price PerformanceOver the past year, Micron shares have risen 9.7%, outperforming the Zacks Computer – Integrated Systems industry’s decline of 9.1%. Compared with other major semiconductor companies, MU stock has underperformed Broadcom AVGO, NVIDIA NVDA and Taiwan Semiconductor TSM, which have registered gains of 56.9%, 33.9 % and 30.7%, respectively.One-Year MU Stock Price Return PerformanceImage Source: Zacks Investment ResearchMicron Key Valuation MetricFrom a valuation standpoint, MU appears to be trading at a discount relative to the industry and is trading well below its mean. Going by the price/sales ratio, the company’s shares currently trade at 2.80 forward sales, lower than 3.15 for the industry and the stock’s mean of 2.98.Micron Forward 12-Month P/S RatioImage Source: Zacks Investment ResearchInvestment Consideration for MU StockBeyond AI and data centers, Micron’s business is still significantly tied to traditional consumer markets, including personal computers (PCs) and smartphones, both of which are seeing sluggish demand recovery.In the first quarter of fiscal 2025, Micron’s Embedded Business Unit, which includes mobile memory, saw revenues decline 10% sequentially. The company expects low-single-digit growth in smartphone shipments and mid-single-digit growth in PC sales for 2025. These weak projections suggest that a full recovery in Micron’s consumer-driven segments is still far off, limiting the upside for its DRAM and NAND sales.Additionally, the ongoing U.S.-China trade tensions remain a critical risk factor. Given Micron’s substantial exposure to the Chinese market, any escalation in disputes could disrupt its supply chain or lead to new tariffs, directly impacting its margins.Moreover, while the pricing outlook for memory chips appears robust, the company’s reliance on lower-margin NAND products and slow progress in achieving manufacturing efficiencies could temper profitability growth in the near term.Conclusion: Sell MU Stock for NowDespite solid year-over-year growth projections for the top and bottom lines in the second quarter, Micron faces multiple near-term risks that could weigh on the stock’s price performance. Margin contraction, weakening consumer demand and geopolitical uncertainties all present serious headwinds, making it a good time to exit investments in MU stock.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Micron Technology, Inc. (MU): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis Report Broadcom Inc. (AVGO): Free Stock Analysis Report Taiwan Semiconductor Manufacturing Company Ltd. (TSM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks