It’s been a brutal few years for companies that rely on the chip industry. Automotive and electronics segments have suffered, and it goes without saying that the chipmakers themselves have as well.
One such company is Micron Technologies – a Boise, Idaho-based company specializing in the manufacturing of memory & storage chips. But, after the company issued an upbeat outlook yesterday, there is hope that the worst is over. Micron’s guidance has sales as high as $3.9 billion in the fiscal third quarter, and the company is poised to beat projections of $3.75 billion.
And while the focus is primarily on Micron, other chip-makers have increased their own upbeat guidance. The recovery from COVID-19 restrictions is well underway, and sales have picked up in the automotive industry in particular.
This news sent Micron (MU) shares nearly 6% higher yesterday. But, there is still cause for concern not just for this company – but the industry as a whole. While automotive demand is up, phone and computer sales are down with no sign of slowing. Inflation has dramatically weakened consumer spending.
As a result, there is fear that companies like Micron will have to cut prices and sell chips for lower than they cost to make. Just last quarter alone Micron’s prices shrank 20%. This is just piling onto what is shaping up to be the worst year for the company since 1984 from a profitability standpoint. The company is on course to end up more than $3 billion in the red this year.
Micron has worked to cut costs across the board, slashing its workforce by 10% just 3 months ago and reducing spending on new plants/equipment by 40%. But is it enough to make this stock an attractive addition to your portfolio? Or, if you’re currently invested in MU, you may be wondering if this 6% bump is as good as it’s going to get in the near future.
We’ve uncovered 3 things in the VectorVest stock analyzing software that you need to see before you make your next move.
Despite Very Good Timing, MU Still Has Poor Upside Potential
The VectorVest system simplifies your trading strategy by telling you everything you need to know in just 3 ratings. These are relative value (RV), relative safety (RS), and relative timing (RT). Each rating sits on its own scale of 0.00-2.00, with 1.00 being the average.
By picking stocks with appreciating ratings above the average, you can win more trades with less work. But to make things even easier, VectorVest provides a clear buy, sell, or hold recommendation based on these ratings for any given stock, at any given time - including MU:
- Poor Upside Potential: The RV rating assesses a company’s 3-year price appreciation potential compared to AAA corporate bond rates and risk to give you a true sense of its value. And right now, MU has a poor RV rating of 0.63. Plus. it’s overvalued at $63/share - with a current value of just $39/share.
- Fair Safety: In terms of risk, MU is a fairly safe stock - as confirmed by the RS rating of 0.98, just shy of the average. This is calculated by analyzing the company’s financial consistency & predictability, debt-to-equity ratio, and business longevity.
- Very Good Timing: The one thing MU has going for it is timing - its price trend has been strengthened as a result of this upbeat outlook, earning it a very good RT rating of 1.33. This rating is derived from a deep analysis of the direction, dynamics, and magnitude of price movement. It’s taken day over day, week over week, quarter over quarter, and year over year.
The overall VST rating for MU is just fair at 1.06. So, what does that mean for you - should you buy, sell, or hold MU stock right now? Get a clear answer on your next move through a free stock analysis at VectorVest!
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VectorVest advocates buying safe, undervalued stocks, rising in price. As for MU, it has poor upside potential - but fair safety and very good timing after raising guidance.
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