Is Micron Technology Stock a Buy Now?

Micron Technology (mu 0.18%) A messy earnings report came out in September. 29. Fourth quarter of fiscal 2022, through September. On Jan. 1, the memory chip maker’s revenue fell 20% from a year earlier to $6.64 billion, missing analysts’ expectations of $140 million and ending its ninth straight quarter of revenue growth. Its adjusted net income fell 42% to $1.62 billion, or $1.45 a share, but still beat consensus estimates by 8 cents.

For the first quarter of fiscal 2023, Micron expects its revenue and adjusted EPS to decline by approximately 45% and 98% year over year, respectively. Analysts had only expected its revenue and earnings to decline 26% and 67%, respectively.

Digital illustration of semiconductor.

Image credit: Getty Images.

Those headline numbers were discouraging, but Micron’s stock held fairly steady following the report. That’s likely because its shares have fallen nearly 50% this year as investors brace for a cyclical decline in memory prices. So should investors end up buying some Micron shares before the memory market recovers?

Why is Micron a Cyclical Stock?

In fiscal 2022, 73% of Micron’s revenue comes from DRAM chips, 25% from NAND (flash memory) chips, and the rest from other types of memory. Micron is not the world’s largest producer of DRAM and NAND chips, but it makes chips that are denser (and therefore more energy efficient) than its larger Korean rivals Samsung and SK Hynix.

This technological advantage, and the fact that it doesn’t have a foray into the non-memory market like most competitors, makes Micron a “pure game” in the long-term growth of the memory chip market. But it also means that Micron is more directly affected by cyclical memory prices than its industry peers.

Micron’s last cyclical decline was in 2019-20, when memory chip makers produced too many chips for the slowing smartphone and PC markets. The oversupply caused memory prices to plummet, and as the pandemic worsened, many customers began hoarding those cheap memory chips — leading to a slump that will persist even as Micron and other top chipmakers curb production of new chips.

But starting in the second half of 2020, memory prices rebounded as new 5G devices hit the market, PC sales accelerated as more people worked from home, and data centers upgraded their infrastructure to handle the surge in cloud services. Two years of growth spurts boosted Micron’s top line, but also gave it a difficult year-over-year comparison in the post-pandemic market. Macroeconomic headwinds have also exacerbated this cyclical slowdown.

How long will this cyclical downturn last?

Micron still posted 11% revenue growth in fiscal 2022, with double-digit growth in both DRAM and NAND revenue, as its non-GAAP (generally accepted accounting principles) gross margin hit a three-year high.


FY 2022

FY 2021

FY 2020

DRAM Revenue Growth (YOY)




NAND Revenue Growth (YoY)




Total Revenue Growth (YoY)




Gross Margin*




Data source: Micron. YOY = YoY. *Non yawning.

Unfortunately, its gloomy forecast for the first quarter of 2023 suggests that its cyclical slowdown is just beginning. In its fourth-quarter report, it warned that in an “extremely aggressive pricing environment,” an “unprecedented confluence of macro events and customer inventory adjustments is driving down DRAM and NAND demand well below final consumption levels.”

As a result, Micron expects the industry to see “supply growth significantly outpacing demand growth” for the remainder of 2022, which could lead to “very high supplier inventories for DRAM and NAND chips.” However, it expects the situation to improve in 2023 as its demand growth begins to outpace supply growth in both markets.

Micron and its industry peers are again trying to re-establish that balance by limiting the production of new chips. If revenue growth stalls temporarily, Micron remains committed to returning 100% of its free cash flow (FCF) to investors through buybacks and dividends — from $2.8 billion in fiscal 2021 to $3.2 billion in fiscal 2022.

Is Micron an Undervalued Chip Stock?

Micron investors should brace for at least a few quarters of lower revenue and profits. Currently, analysts expect its revenue and adjusted earnings to decline by 23% and 64%, respectively, in fiscal 2023. After Micron’s first-quarter estimates generally fell short of Wall Street’s expectations, those estimates may need to be lowered further.

However, they also expect its revenue and adjusted EPS to start growing again in fiscal 2024 as the cyclical downturn finally ends. We should take these estimates with a grain of salt, but they suggest Micron’s stock is severely undervalued at just six times expected earnings. Its 0.9% forward dividend yield won’t appeal to any serious income investor, but it’s still a nice bonus for patient investors willing to weather cyclical headwinds.

Micron’s stock will continue to be under heavy pressure in this tough market, but its technical strengths, financial stability, and low valuation should limit its downside potential until the DRAM and NAND markets recover.

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