Micron stock price has crashed into a local bear market after moving from a high of $470 on March 18 to the current $375. This retreat happened as traders reacted to the falling DRAM prices. Still, there are signs that the MU stock has become one of the most undervalued companies in the US.
Micron Stock Price Has Become a Bargain Amid Falling DRAM Prices
The MU stock has suffered a strong reversal in the past few days as investors react to the ongoing DRAM memory prices retreat, a sign that the memory shortage is ending. In a recent note, Citi analysts slashed its stock target to $425 from $525.
The analysts noted that Micron and its peers had started to negotiate with other top hyperscalers to lock in base volumes, prices, and prepayments. At the same time, there are concerns that the recently announced TurboQuant, which reduces AI compute and memory cost per inquiry.
Still, these concerns have made Micron one to the cheapest companies on Wall Street, especially when you compare it with the expected growth.
Data compiled by Seeking Alpha shows that the forward price-to-earnings ratio has dropped to 5.85, much lower than the sector median of 21. Its five-year average stands at 74, while the S&P 500 Index has a multiple of 19.
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Micro is one of the fastest-growing companies in the tech industry. The most recent results showed that its quarterly revenue rose by 196% YoY to over $23.9 billion. It was up by 75% QoW as demand continued to be much higher than supply. Most of its revenue growth was in the DRAM segment, which made $18.8 billion.
Micron’s revenue is expected to grow by 258% to $33.3 billion this quarter. Its annual revenue is expected to jump by 190% this financial year to $108 billion, followed by $165 billion next year. As such, while the company’s business is expected to slow and possibly go through inventory issues in the next few years, a forward 5x earnings multiple is a bargain.
The company also has a highly encouraging Rule-of-40 multiple, which is calculated by adding its revenue growth and margins. Its forward revenue growth is 190%, and its profit margin of 41%, giving it a multiple of 231%.
MU Stock Price Technical Analysis
The daily timeframe chart shows that the MU stock price has crashed from a high of $467 to a low of $312 last week.
A closer look shows that the stock has formed a giant megaphone pattern, which is made up of two diverging trendlines.
It has remained above the 100-day Exponential Moving Average (EMA), and is approaching the Major S&R Pivot point.
Therefore, the stock will likely continue rising as bulls target the Strong Pivot Reverse level of the Murrey Math Lines at $437, which is about 17% above the current level. A move above that level will point to more gains to the Ultimate Resistance level at $500.
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