I am bullish on Micron (MU). This American company’s stock has a forward P/E valuation of just 7.8x.
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Micron is an American firm engaged in the $66.8-billion DRAM (Dynamic Random Access Memory) industry. It also competes in the $46.6-billion NAND flash storage products industry.
Micron’s stock is trading at a 26% discount to its 52-week high of $96.96. (See Micron stock charts on TipRanks)
Catalyst for DRAM
Microsoft (MSFT) has made it final: Windows 11 requires TPM 2.0 hardware security compliance. Most Windows computers in use today cannot comply with this TPM 2.0 requirement.
The most-likely scenario is people will just have to buy new laptops and desktop PCs if they want Windows 11. This can boost the PC DRAM and NAND flash storage segments of Micron.
Micron is the world’s No. 3 manufacturer of server/PC DRAM products, with 23% market share.
PC builders like Lenovo (LNVGY), Dell (DELL), and HP (HPQ) will bid high to get RAM, SSD drives, and processors for their upcoming Windows 11 computer products.
Growth Driver For Micron
This company also sells consumer and data center-grade solid-state drives (SSD). Many laptops and desktop computers now come equipped with Micron’s NVMe SSD hard drives.
Micron’s NVMe SSD products give it an 11% market share in the $46.6-billion NAND flash storage industry.
Micron Is Undervalued
Micron’s stock is more affordable than its semiconductor peers. MU has a trailing P/E ratio of 20.1x. This is lower than AMD (AMD) at 36x, and Nvidia (NVDA) at 73.8x. AMD does not pay any dividends. Micron pays greater dividends than Nvidia.
MU’s Piotroski F score is 8, signifying that it is very strong financially, and presents excellent value. The total cash position of Micron is $8.4 billion, and its net operating cash flow is $18.9 billion.
The short-term assets of $18.6 billion exceed Micron’s short-term liabilities of $5.5 billion, and long-term liabilities of $8.2 billion.
Wall Street’s Take
The consensus among Wall Street analysts is that Micron is a Strong Buy, based on 18 Buys, and four Holds. The average MU price target is $102.73, implying 43% upside potential.
Conclusion
The undervaluation of Micron makes it a very attractive investment.
Disclosure: At the time of publication, Motek Moyen did not have a position in any of the securities mentioned in this article.
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