Shares of Micron Technology (NASDAQ: MU) have been on a roll recently. The memory chip veteran’s shares have shown a total return of 40% in 2024 and 81% throughout the last 52 weeks, leaving the broader stock market far behind in every time spans.
Nevertheless, Micron’s stock has also dropped 22% below the all-time high it set in June, every week before its third-quarter earnings report.
Knowing that Micron’s industry has strong cyclical tendencies, many investors are wondering whether it’s time to money on this cycle’s profits directly. Despite every part, the next big drop could possibly be across the corner.
So, let’s take a take a take a look at Micron’s business cycle and whether that could be a superb time to convert its paper gains into cold, hard money.
My two cents on the timing of investments
I’ll get around to the Micron evaluation in a minute, but let’s ponder an important investing strategy first.
My favorite holding period is with no end in sight. Market timing is a difficult game — and I actually consider it as a game, not investing.
I’m not alone on this approach. Master investor Warren Buffett just isn’t attempting to maximise his returns by buying and selling stocks at precisely the precise moment. And when his Berkshire Hathaway makes a move — buying, selling, moving assets from one holding company to a distinct — the transaction just isn’t inspired by the final health of the stock market. Buffett studies each potential investment until he knows it similar to the back of his hand, and only then will he hit those “buy” or “sell” buttons.
As Buffett said in Berkshire’s annual meeting throughout the spring of 2022, the broad market is unguessable:
Now we’ve the faintest idea what the stock market goes to do when it opens on Monday. Charlie and I, I don’t think in frequently we’ve worked together, … I don’t think we’ve ever made a alternative where either one in all us has either said or been pondering ‘we can purchase or sell’ based on what the market’s going to do or for that matter, on, on what the economy goes to do. We have no idea.
There you’ve got it. If investing geniuses Warren Buffett and Charlie Munger never had “the faintest idea” what the market would do next, then I don’t stand a likelihood of making the precise guess.
Perfect timing doesn’t exist
On that note, there really just isn’t a splendidly right and proper time to buy Micron Technology stock. As long as the company is fundamentally strong and continues to innovate, any time will probably be an outstanding time to take a position, provided your investment horizon aligns with the company’s long-term growth potential. Micron Technology has shown resilience and suppleness throughout the highly competitive memory chip market, which bodes well for its future.
Micron’s business cycle
As a tightly focused specialist in memory chip design and manufacturing, Micron operates in a cyclical industry. The pc memory market is heavily influenced by supply and demand dynamics in end-stage goal markets, resembling smartphones, data center systems, and modern cars with tons of information processing power.
Historically, Micron has experienced several periods of rapid growth followed by significant declines, mirroring the broader semiconductor cycle. This cyclicality could make short-term investing tricky, however it surely also provides opportunities for long-term investors who can ride out the downturns.
Micron’s recent financial performance sure looks cyclical at a glance. Despite the impressive returns over the past 12 months, the stock’s drop from its all-time high suggests market makers are wary of the next potential downturn. Nevertheless, this drop doesn’t necessarily signal the highest of Micron’s latest swing into high-growth territory.
Analyzing Micron’s cyclical performance
From a historical perspective, Micron’s business cycle appears to be on the upswing. While past performance doesn’t guarantee future results, there are compelling reasons to bet on this positive trend.
The seemingly infinite growth of artificial intelligence (AI) systems, the recent recovery in smartphone sales, and the increasing popularity of computer-packed vehicles suggest a sturdy future demand for Micron’s memory chips. And all of those flourishing goal markets are increasing the amount of memory included per phone, server, or automobile — those newfangled AI features require quite a few memory, regardless of every part.
Given these points, Micron’s growth phase appears to have a great deal of life left in it.
Industry trends and future prospects
Several industry trends suggest that Micron’s long-term prospects remain robust. Beyond the markets mentioned above, data storage capacities are also rising resulting from cloud computing and 5G wireless networking technologies. Micron’s products are in heavy demand.
Moreover, Micron’s strategic initiatives aim to mitigate the outcomes of cyclical downturns. By diversifying its offerings and targeting more stable end markets, Micron can reduce its vulnerability to industry volatility. The company achieves this by specializing in high-value solutions, uniquely powerful memory products, and a rapidly expanding portfolio of specialized chips. The memory present in your smartphone could be less effective in an AI-training server, and vice versa.
Too late to buy Micron stock? Not in my book.
So, is it too late to buy Micron Technology stock? Not necessarily. I’d actually argue that the lower share price opens the window for opportunistic buying of a high-quality stock.
Micron’s stock has had a sturdy run, and the industry is known for its cycles, but the company’s solid fundamentals and strategic positioning make it a compelling investment for those with a long-term perspective. Despite my lack of surefire insight into the stock market’s next bull run or crisis, I’m sure the demand for memory chips will rise over time and Micron will take advantage of that unstoppable trend.
Timing the market is notoriously difficult, even for seasoned investors like Warren Buffett. As a substitute, specializing in the company’s long-term potential and maintaining a patient investment approach should yield more rewarding ends in the long run.
And on that note, it isn’t too late to buy Micron stock the least bit. Actually, I highly recommend it.
Must you invest $1,000 in Micron Technology directly?
Before you buy stock in Micron Technology, consider this:
The Motley Idiot Stock Advisor analyst team just identified what they imagine are the 10 best stocks for investors to buy now… and Micron Technology wasn’t one in all them. The ten stocks that made the cut could produce monster returns within the approaching years.
Consider when Nvidia made this list on April 15, 2005… whenever you invested $1,000 on the time of our suggestion, you’d have $722,626!*
Stock Advisor provides investors with an easy-to-follow blueprint for achievement, including guidance on constructing a portfolio, regular updates from analysts, and two latest stock picks every month. The Stock Advisor service has greater than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of July 15, 2024
Anders Bylund has positions in Micron Technology. The Motley Idiot has positions in and recommends Berkshire Hathaway. The Motley Idiot has a disclosure policy.
Is It Too Late to Buy Micron Technology Stock? was originally published by The Motley Idiot