Micron Technology (MU) Stock Trades Down, Here Is Why

Jabin Bastian /
2024/06/27 12:47 pm EDT

What Happened:

Shares of memory chips maker Micron (NYSE:MU) fell 10.6% in the afternoon session after the company reported second-quarter earnings results. Adjusted EBITDA and free cash flow came in below analysts' expectations. Sales only narrowly beat expectations during the quarter, and the revenue outlook for the next quarter was roughly in line. The market reaction suggested expectations were high heading into earnings, given its strong exposure to the booming AI market. Notably, sales in the DRAM business - which is anticipated to gain from AI - fell below Wall Street's estimates during the quarter. Overall, the results were mixed. 

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Micron Technology? Access our full analysis report here, it's free.

What is the market telling us:

Micron Technology's shares are somewhat volatile and over the last year have had 10 moves greater than 5%. But moves this big are very rare even for Micron Technology and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The previous big move we wrote about was 9 days ago, when the company gained 5.9% on the news that Bank of America analyst added the company to its US 1 List, noting that it is a "top US memory company." The analyst also raised Micron's price target from $144 to $177. Bank of America explained that "the emerging market for AI features on-device, aka Edge AI ...will slowly but steadily supplement core or data center AI hardware" and "the two most important beneficiaries of Edge AI will be manufacturers of compute and memory chips."

Micron Technology is up 61.8% since the beginning of the year, but at $133.10 per share it is still trading 13.3% below its 52-week high of $153.45 from June 2024. Investors who bought $1,000 worth of Micron Technology's shares 5 years ago would now be looking at an investment worth $3,499.

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