Micron TechnologyNASDAQ: MU

Micron Technology, Inc. (NASDAQ:MU ) Post Earnings Q3 2024 Earnings Conference Call June 26, 2024 5:00 PM ET Company Participants Satya Kumar - IR Manish Bhatia - EVP, Global Operations Mark Murphy - CFO Sumit Sadana - EVP and Chief Business Officer Conference Call Participants CJ Muse - Cantor Fitzgerald Aaron Rakers - Wells Fargo Srini Pajjuri - Raymond James Brian Chin - Stifel Nicolaus Harsh Kumar - Piper Sandler Quinn Bolton - Needham & Company Vivek Arya - Bank of America Securities Operator Thank you for standing by. Welcome to Micron Technology's Post Earnings Analyst Call.

I reaffirm my "strong buy" for Micron Technology, updating the fair stock price to $171.45 and projecting $275.07 by 2029, indicating 17.8% annual returns. Micron plans a $150 billion investment in manufacturing and R&D over the next decade, including building four new fabs with $20 billion in federal subsidies. Micron is third in the DRAM and NAND markets, trailing behind Samsung and SK Hynix. The company focuses on cost-efficiency to stay competitive.

Micron Technology reported terrific growth and its guidance is solid. The booming demand for Micron's AI-focused high-bandwidth memory will help it sustain its strong growth momentum.

Our theme of Internet Infrastructure Stocks – which includes a diverse set of companies that sell hardware and software that underpin the Internet including server processors, graphics units, memory, and networking equipment - has fared very well this year, rising by 31% year-to-date, well ahead of the Nasdaq 100, which remains up by roughly 20%. This follows a solid 2023, which saw the theme rise by 66% over the year.

Micron beat revenue and earnings expectations in fiscal Q3 2024, but stock price slumped in extended-hours trading. Concerns over lower-than-expected cash flow and just in-line guidance for the current quarter led to a downgrade in rating. Despite strong revenue growth driven by AI demand, cash flow underperformance and potential risks warrant a more cautious approach.

Micron suffered from a 7% pullback post-earnings despite beating Q3 FY2024 expectations and providing better-than expected Q4 guidance, presenting a compelling buying opportunity. Its top-line growth has rebounded significantly from a 50% decline in FY2023, driven by the AI boom, with an expected 60.5% YoY growth in FY2024 and robust margin expansion. The Street remains bullish on MU's earnings growth outlook, projecting a significant 672.6% YoY non-GAAP EPS increase in FY2025.

The market has overreacted to MU's double beat FQ3'24 earnings call and promising FQ4'24 guidance, with the stock losing -16% of its value since the recent peak. It is apparent by now that the pulled forward rally over the past few quarters have not been sustainable, with the stock still expensive here. Despite the robust generative AI tailwinds for MU's HBM/ SSD segments and the potential record high revenues in 2025, we believe that the stock needs another deep pullback to $110s.

Nvidia stock staged an incredible run over the last 18 months, but it now looks quite expensive. Investors might find better value in other stocks in the artificial intelligence (AI) chip space, like Micron Technology.

Micron (MU) dropped post-earnings, triggering a buy-on-weakness signal with SID Buy Signal and continued inclusion in our 2024MP Model Portfolio. MU outperforming Index trend, likely to attract portfolio managers adding to positions on pullback, identified support levels on the chart. Chart signals will show bottom for buying on weakness when portfolio managers start buying again at lower prices.