This Stock Looks Well-Positioned for Growth

Micron Technology (NASDAQ:MU) investors have endured a bumpy 2021 so far. MU stock has closed as high as $95.59 and as low as $74.05, with plenty of movement throughout the year. Shares are currently rallying from a $76.80 close more than a week ago. In the grand scheme of things, though, the volatility is minor compared to the overall gain of 81% over the past 12 months. Are those kind of gains going to continue? If so, now might be the time to make a move before the latest rally gains steam.

That could happen, given this week’s event. Micron CEO Sanjay Mehrotra will be part of an investor event on May 25.

What might come up? You can bet the global shortage of semiconductors and how that might affect Micron and its shareholders will be in the spotlight. Expect to see conversations about Micron’s four key business segments as well.

Speaking of which, now would be a good time to see what global trends are showing in each of those segments.

Compute and Networking Business Unit (CNBU)

CNBU includes memory products for PCs and enterprise use. The global DRAM glut that hurt MU stock in 2019 is over, and now computer makers are scrambling for chips. In Micron’s latest quarter, CNBU showed again that it was the company’s most important business unit. Revenue of $2.7 billion was up 34% year-over-year, and accounted for 41% of total revenue for the quarter.

What is the future looking like? The global market for DRAM and NAND flash memory was worth $142.2 billion in 2020 and is projected to grow to $200.6 billion by the end of 2027.

Storage Business Unit (SBU)

Micron’s storage segment includes solid state drives (SSDs) along with storage solutions for enterprise and cloud computing servers. In the last quarter, Micron’s SBU saw revenue decline 2% YoY to $850 million.

However, with data centers expected to resume spending on infrastructure, the global picture for computer storage looks brighter going forward. Valued at $72.5 billion in 2020, it’s on track to hit $77 billion by the end of this year and $89.7 billion in 2025.

Mobile Business Unit (MBU)

Micron’s MBU is another key division. Focused on memory and storage products for mobile devices — most notably smartphones — the segment generated $1.8 billion in revenue last quarter. That was up 44% YoY, reflecting a 5G-driven resurgent demand for smartphones.

The global smartphone market was valued at $715 billion in 2020. It’s projected to reach $1.35 trillion by 2026. That’s a CAGR of 11.2% between 2021 and 2026. That anticipated boost in smartphone spending is going to be a big win for Micron’s MBU and will help to fuel MU stock growth.

Embedded Business Unit (EBU)

Finally, there is the EBU, which is embedded memory and storage chips. You’ll find these in a wide range of “smart” products, vehicles and industrial solutions. In the last quarter, EBU revenue was $935 million, up 34% YoY.

Is continued growth in the cards for Micron’s embedded chips? Looking at the global market for embedded processors should give a clue. Worth $21.4 billion in 2018, it is forecast to reach $36.4 billion by 2026. Analysts are calling for continued moderate growth in this area.

The Bottom Line on MU Stock

With a ‘B’ rating in Portfolio Grader, MU stock isn’t quite perfect, but it is a great play on the ongoing global chip shortage. One of the great things about Micron is that it operates its own fab plants. When demand for a segment like smartphone chips rises, Micron doesn’t have to wait in line with all the other companies at a custom chip fabrication plant.

Looking at the recent performance of Micron’s business segments and the projections for global demand in those areas over the next few years, I’d say MU stock is in a good position to deliver long-term growth. Expect to hear more about that next week when the company’s CEO shares his thoughts.

— Louis Navellier and the InvestorPlace Research Staff

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Source: Investor Place