Micron (NASDAQ:MU) has experienced a volatile 2024, with its stock sliding roughly 27% from its mid-June peak, despite reporting solid earnings in recent quarters.
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However, leading up to today’s fiscal 2025 first-quarter results, Micron shares have shown signs of recovery, rising 11% over the past four trading sessions.
One investor, known by the pseudonym Deep Value Investing, believes this surge could be an opportunity to bet against Micron before its earnings release.
“I remain bullish long-term on Micron’s pivot to high-margin memory products, but I anticipate near-term volatility warranting a temporary sell rating,” Deep Value explains.
The investor highlights a couple of looming challenges that could hinder MU’s short-term revenue growth, potentially dragging down its share price.
For one, oversupply risks could create pricing pressures on the company’s DRAM memory products, which currently comprise 70% of MU’s revenues. Deep Value cites analyst reports that argue this could be the case, both next year and beyond.
Geopolitical risks could also lead to a volatile period, particularly revolving around increasing trade tensions between the U.S. and China. “There is no doubt these export control rules will have a direct impact on Micron’s revenue growth in 2025,” notes Deep Value, who points out that 16% of the company’s FY 2024 revenue originated in China (including Hong Kong).
Expecting soft guidance for the second quarter, Deep Value predicts the possibility of a sharp selloff following the earnings release. Acting on this expectation, the investor initiated a short position on December 13, set to expire on December 20. The strategy? To reinvest the proceeds into Micron stock as the investor remains bullish on Micron’s long-term prospects.
“Their move to DDR5, LPDDR5, and HBM makes total sense to me because these are high-margin products that take advantage of the strong growth in AI and data center applications,” Deep Value summed up.
Despite this bullish outlook for the future, as mentioned, the investor believes Micron’s stock is poised for a near-term decline and has therefore issued a Sell rating for now. (To watch Deep Value’s track record, click here)
This view certainly stands out against the broader Wall Street sentiment, which remains highly optimistic ahead of Micron’s earnings report. With 23 Buy ratings and just 1 Hold, the stock boasts a Strong Buy consensus rating. Analysts project an average 12-month price target of $153.05, indicating potential upside of 37%. (See MU stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
