Semiconductor company on December 18 Micron Technology(NASDAQ: MU ) reported earnings for its first quarter of fiscal 2025 (ended Nov. 28) — and by all accounts, the report looked pretty solid.
Micron’s top line grew 85% year-over-year, driven in large part by growth data center Businesses that are undoubtedly benefiting from the artificial intelligence (AI) revolution. More importantly, the company’s profit margins are growing rapidly along with revenues. Micron’s first-quarter net income of $1.9 billion is a vast improvement over the company’s loss of $1.2 billion during the same period in 2023.
Still, since Micron’s earnings report in mid-December, shares have fallen 18% and the current share price of $85 is perilously close to a 52-week low. What’s going on here?
Below, I’ll outline what caused the sell-off in Micron stock and make a case for why I think now is a great opportunity to buy the dip in this unique semiconductor opportunity.
During an earnings call, companies release financial guidance to provide investors and analysts with a loose gauge of what to expect in the coming quarter.
In its Q1 report, Micron issued guidance for $7.9 billion (plus or minus $200 million) and earnings per share (EPS) of $1.23 (plus or minus $0.10). The high end of Micron’s near-term revenue forecast shows a top-line figure of $8.1 billion. This was considered unfathomable by the investment community, as it paled in comparison to Wall Street’s expectations of $8.9 billion.
Additionally, the company’s EPS guidance of $1.23 is materially lower than the consensus estimate among analysts, which sits at $1.97. Given the weaker-than-expected forecast, it’s not surprising to see investors bearish on Micron stock.
Image source: Getty Images
While Micron’s guidance may seem redundant, it’s important for investors to zoom out and consider the bigger picture. Should Micron achieve its target guidance of $7.9 billion in sales during Q2, that would mean 36% year-over-year growth. Additionally, the EPS forecast of $1.23 represents year-over-year growth of 73%.
When you consider these figures, it’s hard to discount a business that’s growing revenue by the mid-30 percentage points and growing its earnings power at nearly double the rate.
In addition to the above financials, it is important for investors to understand Micron’s position in the chip sector. Micron develops storage and memory chips. Industry research suggests that Trillions of dollars are expected to be invested in AI capital expenditures (capex) in the coming years. In theory, this subtly implies that training and inference workloads for generative AI development are expected to become more sophisticated – thus underscoring the need for increased chip ware.
New GPU from nvidia, Advanced Micro Devices, Amazon, the alphabet, MicrosoftAnd Meta platform Come market, Micron sits in a lucrative position to take advantage of the growing demand for storage and memory chips. To me, the long-term thesis surrounding Micron is as compelling as ever.
While each company in the peer set below plays a different role in the semiconductor landscape, the trends in the graph make one thing abundantly clear: Investors are discounting Micron’s potential relative to other opportunities in the chip space.
Micron’s forward price-to-earnings (P/E) multiple of 12 is hovering around its lowest levels in a year and pales in comparison to any of the company’s peers. I think the selloff in Micron stock is unwarranted and see the company’s discount in major semiconductor stocks as an opportunity to scoop up shares and prepare to hold for the long term.
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John Mackey, former CEO of Whole Foods Market, is a member of the board of directors of The Motley Fool, an Amazon subsidiary. Randy Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an Alphabet executive, is a member of The Motley Fool’s board of directors. Adam Spatacco Holds positions in Alphabet, Amazon, Meta Platform, Microsoft and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Meta Platform, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. Motley Fool has a Disclosure Policy.
