Micron (NASDAQ:MU) has had a rough time in recent months, falling further behind its rival Advanced Micro Devices (NASDAQ:AMD) in total revenue and losing more than 20% of its stock price. But it is possible that the semiconductor maker has hit bottom and is ready for a turnaround.
One big factor depressing the stock’s price in recent weeks has been worry about President Trump’s trade war with China and other economic rivals. China is a huge market for all computer products, including the memory devices that have formed the heart of Micron’s product line.
But China’s retaliation for the Trump policies has largely involved agricultural commodities, manufacturing tools and other larger goods. Additionally, most of Micron’s revenue stream derives from the United States and Europe, not from the Far East.
In any event, Trump’s trade policies have been so erratic that it is hard to forecast exactly what impact they will have on specific industries.
While it is true that Micron stock has lost about one-fifth of its value since peaking three months ago, it is still higher than it was in January. The recent pullback has more to do with analysts recalibrating their overly optimistic forecasts for the company’s future growth prospects.
Cloud’s Silver Lining
The Idaho-based company has a fairly diversified line of products. It produces a variety of semiconductor devices, including dynamic random-access memory, flash memory, and solid-state drives. Its consumer products are marketed under the brands Crucial and Ballistix.
Micron and Intel (NASDAQ:INTC) together created IM Flash Technologies, which produces NAND flash memory.
The industry is less cyclical than it used to be. Purchases of personal computers used to fall off during economic declines. But many of today’s cloud-computing and AI systems have constant needs for memory updates, which are fixed costs rather than marginal ones.
The company has settled on a strategy of serving the fast-moving cloud-computing market. “We stand to benefit from the significant investments cloud service providers are making to build out their IT infrastructure,” CEO Sanjay Mehrotra noted during the company’s most recent earnings call.
He added that the company is seeing “strong market demand for memory and fast storage products due to the value these solutions provide in an economy where data — and fast access to that data — is increasingly important.”
Bottom Line on Micron Stock
The stock price has fallen to the point where the company’s price-earnings ratio is below 5 — something you certainly don’t see in the technology world very often.
The bottom line is that Micron has suffered various setbacks, but secular trends in the semiconductor market will continue to provide the company with substantial revenue while it readjusts its business model. It is not a sure thing by any means, but investors with a moderate appetite for risk should certainly consider adding Micron stock to their portfolios.