Micron stock has slipped substantially over the past few days, falling from this month’s high of $1,107 to $990. It has entered a bear market after falling more than 23% from its year-high. This retreat has happened despite its strong revenue and profitability growth and the latest share buyback announcement, a sign that investors are fearful about the memory industry.
Micron Technology is firing on all cylinders
Micron Technology stock has dropped recently, mirroring the performance of companies in the memory industry. The Roundhill Memory ETF (DRAM) dropped to $52, down by over 35% from its highest point this year. Other top memory stocks like Samsung Electronics, SK Hynix, and Kioxia have also plunged.
The ongoing weakness is happening even as Micron Technology continues firing on all cylinders, with its revenue and profitability growth surging. Its recent earnings report showed that its revenue surged to $54.23 billion in the fourth quarter from $41.46 billion in the previous one. It made $11.32 billion in the same period last year, with its DRAM business being responsible for most of its revenue.
Micron’s net income rose to $37.7 billion, giving it a profit margin of 68%. This makes it one of the most profitable companies in the world, and management expects that this trend will continue. It has pointed to the rising demand amid the ongoing data center rollout in the United States and other countries.
READ MORE: Micron stock has a $3,000 bull case, so why can’t MU break above $1,100?
Micron’s growth to continue
Analysts also predict that the company’s business will continue growing this year. The average estimate among analysts is that its first-quarter revenue will come in at $61.67 billion, up by 351% from a year earlier. After that, its second-quarter revenue is expected to soar to $66.9 billion, with the annual figure hitting $275 billion.
The earnings-per-share, on the other hand, is expected to jump to $38.2 in the first quarter from $4.78 in the same period last year. Its real figures will likely be stronger than expected since the company has a long record of doing better than estimates.
Most importantly, the compant announced a $31 billion share buyback starting on December 9 when the CHIPS Act restrictions end.
Micron Technologies is also highly undervalued, with the forward price-to-earnings ratio being 8, lower than the S&P 500 Index’s average of 19.
Therefore, the ongoing weakness in Micron is that investors are afraid that the artificial intelligence (AI) bubble is about to burst. Ray Dalio and Michael Burry have warned that the bubble will burst soon, a move that will negatively affect companies in the memory industry.
Micron Technology stock analysis
MU stock chart | Source: TradingView
The four-hour chart shows that the MU stock price has slumped in the past few months, moving from a high of $1,253 in June to the current $954. It has slumped below the 23.6% Fibonacci Retracement level of $1,031. Also, the stock has dropped below the psychological level of $1,000.
Micron has also moved below the ascending trendline that links its lowest swing since August. It has also moved below the Supertrend indicator, while the Relative Strength Index (RSI) has pointed downwards.
Therefore, the stock will likely remain under pressure, potentially to the key support level of $735, its lowest level on July 12. Such a move will imply a 22% drop from the current level.
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