This 5G Stock Could Be an Opportunity
Tech stocks have been some of the hottest commodities over the past year. Many stocks that were previously consolidating found new momentum in 2020 thanks to the market rally fueled by the economy reopening.
Take a look at Micron Technology, Inc. (NASDAQ:MU), for instance. It’s a Boise, ID-based computer memory and data storage company that has been around since 1978.
For most of 2018 to 2020, Micron stock was trading sideways—as the chart below shows.
But toward the end of 2020, this four-decade-old tech stock suddenly found new upward momentum. Starting in November, MU stock went on an incredible rally, and the uptrend continued in 2021.
Micron stock was trading around $50.00 per share at the beginning of November 2020. It peaked at $96.96 per share on April 12, 2021. That’s a return of 94% in roughly six months.
Keep in mind that we’re not talking about some small penny stock that makes massive moves all the time. Micron Technology, Inc. was already an established player in the business and a large-cap stock to begin with.
Remember, we’re not measuring from MU stock’s lows in the market bottom in March 2020. This 94% return was measured from the start of November—when the market had already recovered from the pandemic-induced sell-off.
Of course, as we can also see from the following chart, Micron stock has pared some of its gains since its April peak. That’s why I’m looking at MU stock now: instead of chasing parabolic bull runs, a solid stock on a pullback might be a better opportunity than other stocks.
Micron Technology, Inc. (NASDAQ:MU) Stock Chart
Chart courtesy of StockCharts.com
Micron offers two main types of products: dynamic random access memory (DRAM) chips and NAND memory chips. These chips are widely used in personal computers (PC).
And while investors previously had some concerns about the outlook of the PC industry, in the COVID-19 pandemic era, we actually witnessed surging demand for PCs. That was good news for Micron Technology, Inc. (and for Micron stock investors).
And there’s more: Micron’s chips are widely used in smartphones.
We’re currently in the process of a massive 5G rollout around the globe. And as it turns out, each 5G smartphone requires more DRAM than its 4G counterpart, so increasing 5G adoption should translate to higher content opportunities for Micron Technology, Inc.
The number of 5G devices being produced and shipped is expected to grow rapidly. Combining that with the higher content opportunities, it’s easy to see why MU stock could be a great 5G stock.
Indeed, Micron Technology, Inc.’s management expects this tailwind to drive strong results for the company. In June, Micron’s president and chief executive officer, Sanjay Mehrotra, said the following:
Mobile unit sales are expected to show healthy growth this year, with some variability across geographies, driven by an expected doubling of 5G units in calendar 2021 to more than 500 million units. These 5G phones also feature rich content demanding significantly higher DRAM and NAND. We are also encouraged to see bold OEM innovation in new devices like gaming smartphones featuring 18 gigabyte of DRAM.
(Source: “Micron Technology, Inc.’s (MU) CEO Sanjay Mehrotra on Q3 2021 Results – Earnings Call Transcript,” Seeking Alpha, June 30, 2021.)
Mind you, Micron has already been delivering impressive numbers.
In the third quarter of the company’s fiscal year 2021, which ended June 3, it generated $7.4 billion of revenue. That represents a 36.4% increase year-over-year and an 18.9% increase sequentially. (Source: “Micron Technology, Inc. Reports Results for the Third Quarter of Fiscal 2021,” Micron Technology, Inc., June 30, 2021.)
The company reported growth across the board for the third quarter. Micron’s DRAM business—which accounted for 73% of its total revenue—saw its revenue surge by 52% year-over-year. The company’s NAND segment—which accounted for 24% of its total top line—achieved nine-percent revenue growth compared to a year ago.
At the bottom line, Micron earned adjusted net income of $2.2 billion, or $1.88 per share, in the reporting quarter. The amount more than doubled the $941.0 million, or $0.82 per share, it earned in the year-ago period.
Put it all together and what we have with Micron Technology, Inc. is a booming business that could grow even faster in the 5G era.
Considering that Micron stock is currently taking a break after an enormous bull run, this could be a good opportunity for investors who were previously standing on the sidelines.