Should you buy the dip in Micron stock now?

On December 18, Semiconductor Corp Micron technology (NASDAQ: MU) Earnings reported for the first quarter of fiscal 2025 (ending November 28) – and by all accounts, the report looked very strong.

Micron’s top line rose 85% year over year, largely driven by the boom Data center Businesses that are undoubtedly benefiting from the AI ​​revolution. More importantly, the company’s profit margins are expanding as revenues accelerate. Micron’s first-quarter net income of $1.9 billion is a huge improvement over the company’s loss of $1.2 billion during the same period in 2023.

However, since Micron’s earnings report came out in mid-December, shares have collapsed 18%, and the current stock price of $85 is dangerously close to a 52-week low. What’s going on here?

Below, I’ll explain what led to the sell-off in Micron stock and explain why I believe now is a perfect opportunity to buy the dip in this unique semiconductor opportunity.

During an earnings call, companies will sometimes release financial guidance to provide investors and analysts with a loose gauge of what to expect in the upcoming quarter.

In its first-quarter report, Micron issued guidance for revenue of $7.9 billion (plus or minus $200 million) and earnings per share (EPS) of $1.23 (plus or minus $0.10). The upper end of Micron’s near-term revenue forecast suggests a higher figure of $8.1 billion. The investment community viewed this as a bad thing, because it pales in comparison to Wall Street’s forecast of $8.9 billion.

Furthermore, the company’s EPS guidance of $1.23 is materially lower than the analyst consensus estimate of $1.97. Given the weaker-than-expected outlook, it’s not surprising to see investors pulling back on Micron shares.

While Micron’s guidance may seem uninspiring, it is important for investors to zoom out and look at the bigger picture. If Micron meets its targeted guidance of $7.9 billion in sales during the second quarter, that would mean a growth rate of 36% year over year. Furthermore, an EPS forecast of $1.23 suggests 73% year-over-year growth.

When you think about these numbers, it’s hard to discount a company that is growing revenue by 30 percentage points and accelerating its earnings power at nearly double that rate.

In addition to the financials mentioned above, it is important for investors to understand Micron’s position in the world of chips. Micron develops storage and memory chips. Industry research suggests so It is expected that trillions of dollars will be invested In AI’s capital expenditures (capex) over the coming years. Theoretically, this implies that training and inference workloads for developing generative AI are expected to become more complex – underscoring the need for improved chip tools.

The story continues

As new graphics processing units from Nvidia, Advanced micro devices, Amazon, alphabet, Microsoftand Meta platforms When it comes to market, Micron is in a profitable position to seize the opportunity of growing demand for storage and memory chips. To me, the long-term thesis surrounding Micron remains as compelling as ever.

While each of the peer companies highlighted below plays a different role in the semiconductor landscape, the trends in the chart make one thing abundantly clear: investors are underestimating Micron’s potential compared to other opportunities in the chip space.

Micron’s 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 believe the sell-off in Micron stock is unjustified and see the company’s discount among leading semiconductor stocks as an opportunity to snap up the stock and prepare to hold it for the long term.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi 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. Susan Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Adam Spatacco He holds positions at Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has Disclosure policy.

Should you buy the dip in Micron stock now? Originally published by The Motley Fool