Micron Technology (NASDAQ: MU) has experienced a tough six months, with its stock falling 35% and a sharp 16% drop after the release of its fiscal Q1 2025 results on Dec. 18. However, despite the recent setbacks, Micron’s strong prospects in artificial intelligence (AI)-driven markets and the potential rebound in consumer demand could make this an opportune moment for long-term investors to buy.

Q1 Results: Impressive Growth in AI but Weak Guidance

Micron delivered strong fiscal Q1 2025 results, with revenue jumping 84% year over year to $8.7 billion and a swing to profitability of $1.79 per share, compared to a loss of $0.95 per share last year. This growth was fueled by surging demand from data centers, with revenue in that segment increasing by a massive 400% year over year, making up more than half of Micron’s top line.

  • Margins: Non-GAAP gross margin surged to 39.5% from just 0.8% last year, while operating income margin climbed to 27.5% from a negative 20.2%.
  • AI Tailwinds: Micron’s high-bandwidth memory (HBM) chips, vital for AI applications, are experiencing explosive demand. The HBM market is expected to grow from $4 billion in 2023 to $30 billion in 2025. Micron is ramping up production and is already supplying chips to Nvidia’s Blackwell platforms and other customers.

However, guidance for Q2 disappointed Wall Street due to weaker demand in consumer markets, such as PCs and smartphones, where inventory adjustments are taking longer than expected.

Consumer Market Challenges: A Temporary Hurdle

Micron’s CEO highlighted weaker-than-expected bit shipments due to inventory reductions in consumer-oriented segments. Despite this, the company is optimistic about a recovery in PC and smartphone markets in the second half of 2025, driven by:

  • AI PC Growth: AI-enabled PCs will require significantly more memory, with entry-level PCs needing 16GB of DRAM, up from 12GB last year, and high-end PCs requiring 24GB or more.
  • Generative AI Smartphones: Increasing adoption of AI features in smartphones is also expected to boost memory content per device.

Micron’s current quarter guidance reflects a 36% year-over-year increase in revenue to $7.9 billion and a 240% jump in earnings per share (EPS) to $1.43, although it missed Wall Street’s ambitious estimates.

Why Micron Could Be a Bargain Now

Despite recent challenges, Micron’s AI-driven growth opportunities in data centers and the eventual recovery in consumer markets make the stock an attractive long-term play:

  1. Valuation: Micron trades at just 12 times forward earnings, significantly lower than the Nasdaq-100’s forward P/E ratio of 28. This suggests significant upside potential if the company continues to deliver strong earnings growth.
  2. Earnings Growth: Analysts project Micron’s EPS to grow to $6.93 in fiscal 2025, a dramatic improvement from $1.30 in fiscal 2024. If Micron reaches that level and trades at 28 times earnings, its stock price could hit $194, more than double its current price of $90.
  3. AI Momentum: Micron’s increasing presence in AI memory solutions, including HBM chips used in Nvidia’s systems, positions it to benefit from sustained demand in the data center market, which is expected to continue growing rapidly.

Micron’s recent stock decline, driven by weak consumer market demand and conservative guidance, has overshadowed its impressive growth in AI and data centers. With the company poised for a recovery in consumer markets and strong AI-driven tailwinds, Micron offers significant long-term potential. At its current valuation, this could be an excellent opportunity for investors to buy into a company set to thrive as AI adoption accelerates in 2025 and beyond.

This story was originally featured on Finance.Yahoo.

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