Micron Could Be the Guru Bargain Stock of 2018

2017 was a great year for Micron and the stock still has room to run

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Dec 28, 2017
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All the big name money managers seem to own a piece of the American memory and storage technology company, which is also a leading component of the next wave of Internet of Things (IoT) and Artificial Intelligent (AI) devices. What’s even better is that the Micron is currently trading at a pretty low valuation.

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The reason? Big data

Data is the biggest technology component in our lives, and many of us do not even realize it. The global datasphere will grow to 163 zettabytes (zettabyte = one trillion gigabytes) by 2025 and almost every single device will be shedding data or collecting it, or both. Companies are building AI just to be able to analyze the overflow of data, and it’s big business.

Data has changed how we’re educated and entertained, and it informs the way we move through the world around us. Some consider it the lifeblood of our rapidly evolving reality. Right or wrong, good or bad, the developed world is heading to a different type of existence. It's definitely the backbone for trillions of dollar already, and it's only getting bigger. That’s why Micron is so necessary.

Micron reported earnings on December 19 that beat on both the top and bottom lines with sales up an impressive 71% year over year. This growth was primarily attributed to gains in market share and selling prices of its NAND and DRAM products. Both are solid state drives (SSD) with predictions of explosive data center growth ahead of them. More importantly, Micron has figured out how to turn sales into profits while continuing to innovate.

In the last decade the company has gone from $5.8 billion in sales to over $23 billion, turning a net loss of $1.6 billion into a net gain in the last twelve months of $7.5 billion. This has helped it push book value up to 19.48 from 8.55 and with calls for continued growth in profits, forward price to earnings is below 5. What’s more important is that Micron has steadily increased its gross margins, not at 48.2%, which will continue to help it earn more money going forward.

If all they did was keep profit steady with no future growth (or declines) paying 5x earnings would be a no brainer. Don’t forget about the long list of top money managers that own a portion of the stock, most have already seen gains over and above 40% on their investment.

Despite the stock being up almost 100% since last Christmas, considering where the future lies, it could potentially whether any downturn in the market even at this price point. Big data will get bigger regardless of whether the stock market sees a 20%, 50% or 70% correction. Micron is a the leading company that will benefit greatly from that growth, sooner rather than later.

Disclosure: I have no positions in MU.