Micron stock has held steady in the past few days as investors scaled back their positioning in the memory names. MU was trading at $936 on Wednesday, down sharply from the year-to-date high of $1,253. Still, there are several reasons why the company has more room to run after the latest Nvidia earnings report.
Micron stock to benefit from the Nvidia earnings
The latest Nvidia earnings report is highly bullish for Micron and other memory stocks. For one, the company’s revenue jumped to $96 billion, higher than what analysts were expecting. Most notably, its guidance is that its revenue will jump by 70% in the next financial year, higher than the 40% that analysts were expecting.
Nvidia has always been a highly conservative company, meaning that its real results will be higher than that. For one, its guidance did not include any China business, even though the company is already selling its H200 chips there.
These numbers mean that the AI boom is continuing. This is important because Nvidia has a high visibility of the AI sector thanks to its substantial investments in companies like OpenAI, Anthropic, and Nebius.
Therefore, there is a likelihood that Micron’s earnings growth will be higher than expected. Yahoo Finance data shows that analysts expect that its annual revenue will come in at $129 billion, a 247% increase from last year. This will be followed by a $240 billion figure in the next financial year. As a result, there is a likelihood that its figures will be over $135 billion and $250 billion, respectively.
Recent announcements suggest growth is continuing
Many major announcements have been made since Micron published its last financial results. For example, Anthropic has reached a $45 billion deal with Nscale, a top company in the neocloud industry. Nscale primarily uses Nvidia chips and Dell servers. Micron supplies to Nvidia, and has a long-term relationship with Anthropic, meaning that it may benefit from this relationship.
More companies like Riot Platforms, Mara Holdings, Nebius, and CoreWeave all boosted their forward capital expenditure guidance. At the same time, Micron has locked in about $100 billion across 16 multi-year customer contracts through 2030 and this growth will continue.
Micron remains highly undervalued
Another key catalyst for Micron’s shares is that the stock remains significantly undervalued. In theory, a company delivering triple-digit revenue growth and expanding margins should trade at a premium to the broader market.
Not Micron. It has a forward price-to-earnings ratio of 14, much lower than the S&P 500 Index’s 21 and Nasdaq 100’s 30. This divergence is likely because investors are afraid of the cyclical nature of the industry. Also, there is a risk as data centers becomes criticized in the US. Indeed, a report this week showed that half of the proposed data centers in the US may face delays. Such a move would impact Micron and other companies in the industry.
MU stock has bullish technicals
Micron stock chart | Source: TradingView
Technicals suggest that the Micron stock is on the cusp of a strong bullish breakout. A closer look shows that it has formed an inverted head-and-shoulders pattern, a common bullish reversal sign in technical analysis. It has also remained above the 100-day Exponential Moving Average (EMA) and the strong, pivot, reverse of the Murrey Math Lines tool.
Therefore, the stock will likely have a strong bullish breakout as bulls target the extreme overshoot level of $1,750. A move above that level will point to more gains, potentially to $2,000 in the longer term.
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