Micron Technology, Inc. (NASDAQ: MU) celebrated its 40th birthday this year and also reached its highest market capitalization, $72.62 billion, on May 29. Since then, the market has turned bearish, and Micron, one of the world’s leading memory solutions companies, is trading below $50 billion.
Micron at a glance
Micron was founded in 1978 by four individuals in the basement of a dental office in Boise, Idaho. In its early days, its core business involved consulting for semiconductor companies. It had only one customer, Mostek, and the loss of this contract led to a new chapter for Micron. The company began producing DRAM chips. In 1984, it broke ground on its first fabrication site in Boise.
Micron’s innovative success helped the company to reduce costs and stay in the game during periods when memory chip prices were low. Micron used periods of the chip market downturn to acquire assets:
- 1998 it purchased Texas Instruments' worldwide memory operations.
- 2002 it acquired Toshiba's commodity DRAM operations.
- 2010 it acquired Numonyx B.V., STMicroelectronics, N.V., and Francisco Partners.
- 2013 it acquired Elpida Memory, Inc. and Rexchip Electronics Corporation.
- 2015 it acquired Tidal Systems, Convey Computer, and Pico Computing.
- 2016 it acquired Inotera Memories.
History of MU
J.R. Simplot, an Idaho potato farmer, was one of Micron’s first investors. In 1980, he invested $1 million in Micron, and the company went public in 1984 at a price of $14 per share and since its Initial Public Offering (IPO), it underwent three stock splits:
- 5-to-2 split (April 19, 1994)
- 2-to-1 split (May 23, 1995)
- 2-to-1 split (May 2, 2000)
An investment of $100 in Micron at its IPO price of $14, without reinvesting dividends, would be worth around $3,000 at the October 12 close price of $42.47 per share.
Why purchase Micron?
Pros of purchasing Micron stock:
- Low forward price-to-earnings ratio. The next year price-to-earnings is 4.02.
- Double-digit sales growth. Micron grew sales at the five-year average of 14.1% and in the last year, increased sales by almost 50%.
- Micron has significantly decreased its debt in the last year.
- The company unrolled an aggressive stock repurchase program of $10 billion.
Cons of purchasing Micron stock:
- The memory chips price is cyclical and NAND and DRAM memory could see a decrease in the next year.
- Several analysts reduced their price targets for the stock.
- Micron has factories in China and might be affected by tariffs.
How to purchase MU
Here's how you can buy Micron Technology shares today.
- Decide on the size of the investment
When you are buying a stock, you should know how it fits your portfolio. Technology stocks can be volatile and could increase the total risk of your portfolio. It is very important to be comfortable with the risk, so adjust the size of the investment according to your risk tolerance.
- Pick a broker
With Benzinga's help, you can find a suitable broker for you. All you have to do is open an account, transfer money and place a buy order.
- Buy the stock
The easiest way to buy a stock is to place a market order. With a market order, you get your shares at the current market price. This means that you will pay the ask price that is available at the moment of the purchase.
Buying shares like this can lead to some slippage from the price you wanted. There is also a possibility of placing a limit order. With this type of order, fix a price you want and if the market trades lower and hits your price, you’ll buy the shares.
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Future outlook for Micron
All indicators point to Micron as being undervalued, but some could say that it’s cheap for a reason. A decline in Micron’s profit, under the impact of the expected decline in DRAM and NAND prices and the US-China tariffs could change the ratio and make the stock less attractive.
Although the company faces some headwinds, it’s also financially stable enough to overcome these difficulties. It recently lowered its debt and it has an attractive share repurchase program, which could provide some support for the stock price. If you plan to buy Micron, it could be a good idea to do it gradually. There’s no need to rush in to buy, especially since the market is currently under pressure.