Buy 1 Incredible Growth Stock Before Market Cap Surge 67%

Micron Technology Inc. (NASDAQ: MU) shares surged after the company released its second-quarter fiscal year 2024 results (three months ended Feb. 29) on March 20th. The company's stock price rose more than 14% in one trading session on the back of stellar revenue and earnings growth. Micron's metrics have exceeded Wall Street's expectations, and its strong industry guidance is evidence that the company's turnaround is finally here.

Over the past year, Micron shares have risen 93%, and management's forecast for future revenue growth (see below) suggests that there may be even more room for the stock to rise. Let's take a look at the numbers and see why investors should consider buying the chipmaker before its next revenue growth forecast hits its target date.

Micron has stepped up its game.

In the most recent quarter, Micron's revenue grew 58% year-over-year to $5.82 billion. This far exceeded the consensus estimate of $5.35 billion. Even better, Micron's adjusted earnings per share came in at $0.42, down from a year-ago loss of $1.91 per share. Analysts had expected a loss of $0.25 per share in the previous quarter.

A favorable supply-demand balance in the memory chip market meant that higher prices last quarter allowed Micron to significantly improve its profit margins. The price of Dynamic Random Access Memory (DRAM) went up by more than a dozen dollars last quarter, while the price of NAND flash chips went up by 30%, Koon said.

This explains why the company's adjusted gross margin rose to 20% in the last quarter from a negative 31.4% in the same period a year ago, and the operating margin was 3.5%, a significant improvement from a negative 56% in the same period a year ago.

Chief Executive Officer Sanjay Mehrotra cited growing demand for artificial intelligence (AI) server memory as a key reason for the company's turnaround. He said during the latest earnings call:

Mehrotra expects memory prices to move all the way up over time, and predicts that Micron "will generate record revenues and much higher profitability in fiscal 2025." The company's outlook for the quarter far exceeded analysts' expectations.

Micron expects revenue of $6.6 billion and adjusted EPS of $0.45 for the third quarter of fiscal 2024, which is at the midpoint of its guidance range. Wall Street was looking for $6 billion in revenue and $0.09 in EPS. Compared to the same period last year, revenue is expected to grow by 76%, which is a good improvement over the company's growth in the previous quarter.

At the same time last year, Micron was losing $1.19 per share, which means that the rising memory prices will be a big boost to its business. This explains why analysts have raised their estimates for growth after Micron's latest report.

Buying Micron stock is a no-brainer

Micron's stock trades at 6.4 times sales, below the U.S. technology industry's price-to-sales ratio of 7.3. According to consensus estimates, Micron will end the fiscal year with revenue of $24.6 billion, which is up 58% from last year. That's up 58% from last year, and the growth rate is expected to remain impressive next year as well.

Assuming Micron's revenue reaches $34 billion in fiscal 2025 and it maintains its current price-to-sales ratio, its market capitalization will jump to $217 billion, which is a jump of 67.1 TP3T from current levels. That's a jump of $67% from current levels, so it's a good idea for investors to buy Micron stock now, before it soars further after its latest earnings report.

Should you invest $1,000 in Micron Technology now?

Before buying Micron Technology stock, consider the following:

Motley Fool Stock AdvisorA team of analysts has just named what they think is the best name for investors to buy right now.10Only ...... Micron Technology was not included. These 10 stocks could generate huge returns in the years to come.

Stock AdvisorIt provides investors with an easy-to-understand blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. Since 2002, StockAdvisorThe service has more than doubled the return on the S&P 500 Index.

*Stock Advisor's Circular as of March 25, 2024

Harsh Chauhan does not hold any of the above shares.The Motley Fool does not hold any of the above shares.The Motley Fool has a disclosure policy.

Buy 1 Incredible Growth Stock Before Its Market Cap Soars 67% was originally published by The Motley Fool.