Why Micron Rallied 21% This Week
Shares of Micron Technology (NASDAQ: MU) rallied 20.9% on the week through Thursday trading, according to data from S&P Global Market Intelligence.
Micron reported earnings on Wednesday, blowing away analyst estimates while also giving strong guidance. The move comes after the stock had been down nearly 50% from its June highs amid widespread concerns over memory demand. Therefore, the strong beat and guide caused a near-15% surge on Thursday alone.
Micron defies skeptics on AI
In the quarter, Micron saw revenue surge to $7.8 billion, up 93% over the prior-year quarter, with adjusted (non-GAAP) earnings per share of $1.18, up from an adjusted loss per share of ($1.07) in the year-ago quarter.
Both figures beat analysts' expectations. But what really encouraged investors was guidance for $8.7 billion in revenue for the current quarter and $1.74 in adjusted earnings per share. Those guided numbers handily exceeded analyst expectations of $8.32 billion and $1.52, respectively.
AI played a big role, as Micron's high-bandwidth memory (HBM) demand continues to surge, along with other types of data center DRAM such as high-capacity D5 memory and LP5 (low power) memory. In an even more bullish note, Micron increased its addressable opportunity for HBM to reach $25 billion in 2025, up from just $4 billion in 2023.
Analysts had been somewhat bearish on the memory industry coming into earnings, noting that the non-AI sectors of the market in smartphones and PCs may have overbought inventory in the beginning of the year.
While Micron acknowledged this slowdown, it seems temporary. Moreover, the advent of AI-enabled PCs and smartphones should lead to an increase in memory content for these devices in 2025 -- another tailwind.
And Micron is well positioned over competitors
Not only is AI lifting the industry's fortunes, but management also declared Micron was in its best competitive position in its history. Specifically for AI, Micron noted its 12-high HBM3E product has 50% more capacity at 20% less power than the competition today.
With a tech lead over rivals and memory demand set for a strong year ahead, no wonder the stock rallied big this week.
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Billy Duberstein and/or his clients have positions in Micron Technology. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
