Will Micron Stock Pick Up the Pace?

Advertisement

Micron stock - Will Micron Stock Pick Up the Pace?

Source: Shutterstock

Micron Technology (NASDAQ:MU) is one of the top memory chip makers in the world. But Micron stock’s strong position in one of the most important tech sectors in the world isn’t enough to keep it immune from the challenges in the global economy, especially the churning trade war with China.

Unpacking all the nuances of what’s going on in the chipmaking space is pretty complicated these days.

For example, MU stock in particular has been selling off most of the year, and in particular, in the last few months. Its year-to-date and 12-month performance are now flat. The stock is trading in the low 40s, however, its 52-week high was in the upper 60s.

This is a very good lesson about Wall Street as well. When it was trading at a premium, the future for memory chips was bright.

Pain for Micron Stock and the Chip Industry

Memory chips are crucial to all the growing major technologies including gaming, mobility, Big Data, blockchain, AI, VR, AR, driverless cars and smart objects (IoT). And Micron stock was at the center of all these.

But the trade war doused all the enthusiasm for this new age of memory. Somehow, reduced demand from China and unrealistic rumors that China was going to start its own memory chip industry (something that would take at least a decade or more) as well as rising costs due to tariffs did a number on the entire sector.

This was more important than the growing demand from the U.S., Europe, Japan and most of the rest of the world. This was reinforced when MU stock sold off into its Q3 (fiscal Q4) earnings announcement, anticipating bad results.

But, as the corporate leadership had been saying, while some memory chip demand and prices were down, combinations of chips were up and the overall revenue generated from the chip sets offset any price decreases for select individual chips.

Micron stock’s earnings and revenue far exceeded analysts expectations. Yet, the stock was punished because the company guided cautiously for Q4 due to the unknown consequences of the trade war with China.

So, we’re dealing with a company that is doing well but is getting no credit for its success in a difficult market. And looking forward, it has extended the tail of its business cycle because unlike in cycles past, now memory chips are in great demand for scores of new products.

But there’s an old saying on the Street that “the market can be ‘wrong’ much longer than an investor can stay liquid.” Basically, it doesn’t matter how right you are, if the market has it in for a stock (or sector) it’s not going to do you much good to sit around and wait for it to change its mind.

And that’s where we are with Micron stock. The market doesn’t like the sector. If you own it, hang on and be patient. And if you don’t, it’s a great stock but there’s no telling what traders are going to do with it short term. That means there are more timely opportunities out there.

Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough StocksAccelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.


Article printed from InvestorPlace Media, https://investorplace.com/2018/10/will-micron-stock-mu-pick-up-the-pace/.

©2024 InvestorPlace Media, LLC