The stock market isn't giving memory specialist Micron Technology (NASDAQ: MU ) enough credit for the impressive growth it has achieved in 2024, as evidenced by the company's stock price rising 26% so far this year.
It's also worth noting that Micron's stock price has fallen nearly 30% since hitting a 52-week high two months ago. But the news is good for smart investors looking to buy into a company that stands to capitalize on the rapid adoption of artificial intelligence (AI) hardware in multiple end markets, including data centers, smartphones and personal computers (PCs).
Let's take a closer look at why Micron Technology might make a great buy right now.
Micron Technology has the potential to maintain impressive growth over the long term.
The memory industry in which Micron Technology operates has historically been a cyclical industry that goes through boom and bust cycles based on supply and demand dynamics. When demand for memory chips surged, chipmakers like Micron typically increased production to meet that demand. But when demand fell, excess supply built up on hand, causing prices to plummet and squeezing revenues and profits.
The good news is that the memory industry's boom-and-bust cycle is likely over. Grand View Research predicts that annual revenue for the global memory market could grow from $111 billion in 2024 to $240 billion in 2030. AI is likely to play a key role in the growth of this market, as demand for high-bandwidth memory (HBM), which is used to manufacture AI chips, is growing at a much faster pace.
Specifically, the HBM market is projected to grow from $1.8 billion last year in annual revenue to nearly $86 billion in 2030, a compound annual growth rate of 68% over that period. Even better, this isn't the only market expected to see a massive increase in memory consumption due to AI.
AI-enabled PCs equipped with neural processing units to handle AI workloads are expected to have 40% to 80% more dynamic random access memory (DRAM) for faster computing, according to Micron. Similarly, Micron noted that flagship Android smartphones are seeing 50% to 100% more DRAM capacity than last year's models to support generative AI applications.
When we take a closer look at the long-term growth potential of these three markets, it's clear that Micron is at the beginning of a major growth curve. For example, the global data center market is expected to triple revenue between 2024 and 2034, reaching $776 billion in annual revenue ten years from now.
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Meanwhile, the market for AI-enabled smartphones is expected to grow 28% annually through 2030. And the global PC market is expected to grow at a healthy 8% annually through 2030, reaching nearly $257 billion in annual revenue. That means Micron's business has multiple growth drivers that could prevent the memory industry from collapsing again.
As a result, analysts expect the company to maintain its impressive growth over the next few years, with sales expected to rise 61% to $25 billion this year.
MU current year revenue forecast chart
Given the valuation and upside potential, this stock is a no-brainer.
It's already clear that Micron is experiencing impressive revenue growth. More importantly, that will translate into strong earnings growth as well. The company lost $4.45 per share last year, but as you can see from the chart, it's on track to turn a profit this fiscal year. More importantly, Micron's revenue growth forecast for the next two years is also very strong.
MU's current quarter EPS forecast chart
Given the impressive growth this semiconductor stock is likely to deliver, now makes sense to buy, as Micron's stock is currently trading at just 11.7 times forward earnings, a significant discount to the Nasdaq-100's multiple of 27 times forward earnings (which we use as a proxy for tech stocks).
Citigroup recently reaffirmed its price target for Micron at $175 and reaffirmed its buy recommendation on the stock, implying a 62% upside from current levels. Meanwhile, the median 12-month price target for the company among the 41 analysts covering Micron is $165, which would represent a 54% upside from current levels.
Therefore, investors would be wise to buy Micron Technology before the stock market recovery gains momentum, given its very attractive valuation and excellent growth prospects.
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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Harsh Chauhan has no position in any of the stocks mentioned here. The Motley Fool has no position in any of the stocks mentioned here. The Motley Fool has a disclosure policy.
Down 30%, Now's the Perfect Time to Buy This Artificial Intelligence (AI) Growth Stock, and Now is the Perfect Time to Buy While It's Incredibly Cheap, was originally published by The Motley Fool.
