Is Micron Stock a Buy?
Micron Technology, Inc. (NASDAQ:MU) stock is trading more than three percent higher after a rough patch this week. Ostensibly, the bulls have come out for Micron, responding to the siren call of a Nomura Securities upgrade. The point on Micron is that its current trading price is weak. Improved servers and dynamic random access memory (DRAM) capability are going to push MU stock higher.
The recently inaugurated bullish phase is not the result of some accounting trick. It doesn’t even stem from rumors of a takeover—though that’s always a possibility—given last year’s bid from the good folks at China’s Tsinghua Unigroup Ltd. Indeed, Micron stock is actually moving to a sustainable high based on solid factors. For the record, it was Micron that rejected the offer in a purported display of good old-fashioned American pride.
While Micron has faced some difficulties challenging Hynix or Samsung in the growing sphere of NAND processors/chips, it remains a dominant force in DRAM. Micron admitted as much in its last (third-quarter) results, as it admitted that its NAND shortcomings contributed heavily to its 25% year-over-year revenue loss.
Based in Boise, Idaho, Micron offers the broadest industry portfolio in the silicon semiconductor business, including the basic DRAM, NAND, and a host of other modules, memory systems, and solutions. Micron is no startup newcomer. It has 35 years of experience in the tech sector, the equivalent of a century in any other business.
In fact, that’s one of the key points to consider about Micron. Its memory solutions are not some fly-by-night experiment. They have earned a crucial role in making it possible for the achievement of applications in all areas. These include anything from computers to consumer electronics, data storage, networking systems, mobile devices, and embedded systems.
Plus, increasingly, the automotive sector has sought Micron Technology solutions. (Source: “Micron Technology Launches SLC NAND Flash For IoT, Automotive,” NASDAQ, July 7, 2016.) That is an important premise. It’s evidence that the company has a solid business with continued demand. It also confirms that rather than a chronic illness from which it might never recover, Micron has the tools it needs to start pulling off better quarters in the future.
MU stock has absorbed any additional shocks to its bottom line, reducing its workforce by 7.5% and saving $300 million in 2017.
Simply put, Micron stock has a clean slate from which to launch its recovery. This product and innovation-fueled renaissance will be buttressed by two recently achieved legal boundaries:
- Micron recently swallowed a rights agreement, or what people in the know refer to as a “poison pill”. Despite its ominous name, the “pill” blocks any ownership changes when and if another entity acquires five or more percent of its outstanding shares. (Source: “Micron Gains as ‘Poison Pill’ Sparks Speculation It’s a Target,” Bloomberg, July 25, 2016.) Why is that bullish? It suggests Micron has suitors. The interest from China in August 2015 was proof enough of this (see above).
- Micron has filed an 8K form, which allows it to keep any tax advantages based on its recent losses.
Both steps suggest that Micron intends to remain a dominant company in the chip business over the long term. This is where investors can find the essential takeaway point about Micron: it’s a long-term investment prospect. MU stock cannot be judged on a series of bad quarters, especially when the company has clearly shown that it both understands the cause of the missed performance and—most importantly—it knows the solution.
Overall, Micron stock offers some interesting prospects.
The Bottom Line on Micron Stock
Micron is an interesting pick for all the reasons outlined above, but investors will have to wait for it to pay off. Micron has certainly sown the seeds for a recovery, but it will take some time before the fruit blossoms. Until harvest season begins for Micron, investors may want to check out some profitable ideas included in our new report, “Military’s ‘6th Branch’ to Create 22,000 Millionaires Again?” Click here now to get the full story.