What’s Behind Micron Technology Stock’s Strong Outperformance Since 2018?
Micron Technology (NASDAQ: MU) stock price jumped almost 2x from $32 at 2018 end, to almost $62 currently, primarily due to favorable changes in its P/S multiple. This comes as a surprise as the company has witnessed only a marginal rise in revenues over this period, and a slight drop in the outstanding share count. Despite this, the stock has managed to outperform the S&P, which returned roughly 55% over this same time.
In our interactive dashboard, Why Micron Technology Stock Moved: MU Stock Has Gained 94% Since 2018, we break down the factors behind this move.
(A) MU’s Total Revenue has grown just 6.6% from $30.4 billion in 2018 to around $32 billion on an LTM basis
- MU’s total revenue first dropped from $30.4 billion in FY ’18 (MU’s fiscal year ends in August) to $21.4 billion in FY ’20, due to the semiconductor supply glut initially hurting demand, followed by the pandemic which caused supply chain disruptions.
- Revenues then soared to $27.7 billion in FY ’21, and currently stand higher at over $32 billion on an LTM basis.
- DRAM semiconductor sales make up the bulk of Micron’s revenues, with $20 billion of the company’s sales coming from DRAM semiconductors as of FY ’21, making up more than 70% of total revenue.
- For additional details about MU revenues and comparison to peers, see Micron Technology (MU) Revenue Comparison
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(B) Revenue per share (RPS) rose 10% from $26.38 in 2018 to $29.11 currently
- MU revenue rose from $30.4 billion in 2018 to $32.4 billion currently, while the outstanding share count decreased from 1.2 billion in 2018 to around 1.1 billion currently.
- Due to this, RPS has risen around 10% from $26.38 in FY ’18 to $29.11 currently.
(C) Price-To-Sales (P/S) multiple for Micron jumped from 1.1x in 2018-end to 3.7x by 2020 end, but has pulled back to around 2.1x currently, still around 90% higher than its 2018 level
- Despite Micron’s subdued performance between 2018 and 2020, its P/S multiple rose strongly from 1.1x in 2018-end to as high as 3.7x by late 2020, on the back of rising investor expectations.
- However, due to the increased economic uncertainty weighing on the broader markets, the P/S multiple has pulled back, currently standing at around 2.1x, still 92% higher than its 2018 level.
- For additional details about the company stock returns and comparison to peers, see Micron Technology (MU) Stock Return Comparison.
With inflation rising and the Fed raising interest rates, Micron Technology has fallen 43% this year. Can it drop more? See how low can MU stock go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.
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|Trefis Multi-Strategy Portfolio||3%||-21%||214%|
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