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Our Biggest Gainers & Losers of the Day in the $100,000 Build Portfolio

For the 19th December 2024:

• Someone Get Me A Bucket 🤢

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Someone Get Me A Bucket 🤢 

Get me a bucket. The Micron roller coaster is making me sick 🤒 

First, they crushed Q1 earnings. Revenue beat, profit estimates beat, everyone’s happy.

Then they went & spoiled it all by dropping weak Q2 guidance. So if you’re wondering why the stock tanked as much as 17% today, there’s your answer.

But here’s the million dollar question. Should you buy the dip?

Let’s take a closer look. 🔍️ 

THE GOOD STUFF 👍️ 

Q1 was all about showing off their HBM3E. (It’s an ultra-fast memory chip powering AI & data centres)

These bad boys drove Micron’s DRAM (type of memory used in computers, servers, smartphones etc) revenue up 87% year-over-year & 20% quarter-over-quarter. DRAM now makes up over 73% of their total revenue.

Credit to them for managing to ride that wave so hard but it does make think of a phrase that has eggs & baskets in it… anyway…

• Revenue beat: $8.71B vs. $8.7B expected. A small beat, but still a beat.

• Earnings beat: $1.79 per share vs. $1.77 expected. Another win.

• Gross margins: Holding steady at 39.5%, which is solid in a volatile industry

This part is super exciting.

Micron boosted their TAM (total addressable market AKA who will buy their products) for high-bandwidth memory (HBM) to $30B in FY25, up from $25B.

That means Micron think's there’s 5 billion extra dollars out there with their name on it if they play their cards right.

Buying undervalued companies that serve into a growing market is always going to be a match made in heaven. AI is a growing market & Micron just got a delayed black Friday price tag.. 👀 

But before I get carried away, let’s take a look at…

THE BAD STUFF 👎️ 

So, why the 16% stock nosedive?

Weak Q2 guidance. Plain and simple.

Micron expects revenue of $7.9B give or take $200M. Analysts had their hearts set on $9B. Investors weren’t happy & the semiconductor sector took a collective kick in the nuts. 🥜 

And if everything’s going so well, why did they set the bar so low for next quarter?

Well, there’s some worry about slowing AI-related spending, which would put a dent in the demand for Micron’s HBM3E chips. Remember what I said earlier about eggs & baskets?

Since these chips are a huge chunk of their growth, it’s not unreasonable to be a little bit nervous about the hype dying down.

Where Does That Leave Us?

We’ve seen the good, the bad, nothing super ugly. Now what?

I actually think this is a decent buying opportunity. Here’s why:

• Valuation is Criminally low🔥: Micron’s trading at a forward P/E ratio of 8x. For context, the semiconductor industry average is 20x, Nvidia is in the stratosphere, & even a struggling Intel trades at higher multiples. Micron is one of the best value plays in the space.

• Long-term AI play: There might be short-term bumps. Can you think of any industry that doesn’t have them? But let’s be real. AI adoption isn’t slowing down or going away. At least not any time soon. It’s just getting started! Micron’s HBM3E products are a “need” not a “want” for powering AI models & data centers & they’re projecting a full ramp-up into FY26.

  

  Analysts seem to agree there’s still massive room to grow. Even more after today’s drop

• Upside potential: The general consensus it we’ve got at least 50% upside from the current price. I’d tend to agree with that. Today’s drop puts me at a 78% gain for my original price target which I still think is fine.

And from a technical view, this drop leaves us flirting with a support seen in February, August & September of this year. Do you know what happened next then?

We got rallies of between 25% to 75% every time. I’m not saying history’s gonna repeat itself but I doubled my position size today so… do with that info what you will. 💅 😅 

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That’s all! See you same time tomorrow 👋 

P.S Hit reply & let me know what you thought of today’s newsletter. All feedback is welcomed ❤️