As the volatility of the US stock market increases, it is increasingly challenging for investors to choose individual stocks. With the turmoil on Wall Street, all major industries in the S&P have fallen this year, and the chip industry has also fallen amid supply chain disruptions. No exception. According to market data from Investing.com, the Philadelphia Semiconductor Index has fallen by 13.4% this year. However, the index rebounded overnight, rising 3.37% as of the close. It is worth noting that the index rose due to the impact of Micron. Technology companies (NASDAQ:MU) were boosted by a surge of 8.2%.
(Philadelphia Semiconductor Index trend comes from Investing.com)
In fact, Micron Technology’s current stock price is almost the same as a year ago, with a 52-week increase of less than 3%. The company’s stock did suffer a sell-off in January, and the market’s sell-off The tide isn't going around this chip stock. At present, the market is still facing the negative threats of geopolitical crisis and the Federal Reserve's interest rate hike, and uncertainties are still high.
Against this backdrop, Micron Technology has been outperforming other peer stocks since November last year because the company is indeed a value stock with a lower price-to-earnings ratio. Compared with growth stocks, such stocks will be relatively less affected by rising U.S. interest rates. We might as well take a look at this chip stock and see if it still has potential in the market outlook
(The fair value of Micron Technology comes from InvestingPro)
According to InvestingPro’s valuation model, the fair value of the stock is around US$120.94, which is about 30% from the current stock price. 29.6% upside potential, and according to Investing.com's consensus estimate tool, 29 of the 35 analysts currently covering the company have a Buy rating over the next 12 months. The average target price has also reached $111.70, which represents an increase of approximately 19.72% from the current stock price.
From an industry perspective, due to the global core shortage crisis, chip companies’ capital expenditures have reached record highs in recent years, and their scale has also expanded. Moreover, according to a report from Precedence Research, the size of the semiconductor market is expected to increase from The US$430 billion in 2021 will increase to US$808.5 billion in 2030, which represents a compound annual growth rate of approximately 6.6%.
One important point to note is that unlike many chip companies that outsource production to other manufacturers, Micron Technology manufactures its own chips. This does require more funds to invest in building factories, but in the current environment where there is a shortage of chips , which has become a huge advantage of Micron Technology.
In the current geopolitical crisis, Micron Technology is not panicked. The company previously stated that although a small part of Micron comes from Ukraine, it has diversified its procurement of inert gases. Neon gas mainly comes from the EU, the United States and Suppliers from Asia and other places. In addition, Micron maintains appropriate inventories of inert gases and has entered into multiple long-term supply agreements with key suppliers. Company executives also noted that "While we continue to monitor the situation closely and of course hope that the situation will gradually ease, based on current analysis, we believe that our inert gas supply chain is in a reasonable state."
On the other hand, Micron Technology manufactured Chips are used in almost all electronic devices, from watches to mobile phones to doorbells, and a wide range of business lines makes the company more flexible because it means a broader and more stable customer base. This helps the company cope with the current complex market environment.
And, regarding the issue of inflation, since commodity prices related to Micron Technology chips change based on changes in supply and demand, the company may actually benefit from inflation, especially in the memory chip market.
