Micron Technology shares fell Thursday even after the chipmaker posted record fiscal fourth-quarter results, as investors weighed margin and spending concerns against a broader market pullback. Jim Cramer said he's sticking with the stock, pointing to a growing customer pipeline and a buyback catalyst due in December.
Micron shares dropped on Thursday despite delivering what Jim Cramer called a strong quarter Wednesday evening. The drop came as the broader market sold off: the benchmark 10-year Treasury yield climbed as high as 5.34%, its highest since 2002. That followed a hotter-than-expected Institute for Supply Management prices-paid index, which reinforced expectations that the Federal Reserve could raise interest rates again this year.
Margin outlook overshadows record results
Micron's fiscal fourth-quarter revenue came in at $54.23 billion, up 379% from a year earlier. Net income reached $37.7 billion, an increase of 1,077% from the prior year. Yet some investors are focused on Micron's first-quarter gross margin outlook and its plans for increased capital spending on manufacturing capacity, which could eventually leave the market with excess memory supply. Cramer argued those worries overlook Micron's long-term commentary on the supply-demand balance: the company now has 26 strategic customer agreements, up from 16 last quarter, giving it greater visibility into future demand.
Cramer sees a buyback catalyst ahead
Cramer described the outlook for the next couple of years as the best he's heard, though he acknowledged the stock could stay under pressure near term given the current selling momentum. He pointed to December as a potential catalyst, when restrictions tied to U.S. government funding are due to expire and Micron would be allowed to deploy its growing cash pile toward a buyback. According to CNBC: "I don't know why you'd sell it now" ahead of that buyback kicking in, Cramer said.
Robotics could extend the growth cycle
Micron stock is up more than 265% this year, and management is pointing to a new demand driver beyond data centers. CEO Sanjay Mehrotra told analysts that physical AI, including autonomous vehicles and humanoid robots, could become a significant driver of memory and storage demand by the end of the decade, since humanoid robots are expected to need comparable memory and storage to autonomous vehicles, which already require more than 200 gigabytes of memory. Micron also issued guidance for $60 billion to $63 billion in first-quarter revenue, a midpoint that would mark a 339% increase from the same quarter a year earlier.
Sources: CNBC, The Motley Fool
Trading involves risk.
Risk Disclaimer
