For Immediate Release
Chicago, IL – December 24, 2024 – Today, Zacks Investment Ideas feature highlights Micron Technology, Inc. MU, Nvidia's NVDA and Advanced Micro Devices AMD.
2 AI Stocks to Buy at Huge Discounts in 2025: MU, AMD
Today's episode of Full Court Finance at Zacks explores where the stock market stands heading into 2025.
The episode then dives into two technology stocks—Micron and Advanced Micro Devices—trading over 50% below their average price targets that investors might want to buy in 2025 and hold for long-term artificial intelligence (AI) growth.
No matter what happens before Christmas, a larger downturn will come at some point to recalibrate overheated stocks.
Investors should start adding to their watchlists to take advantage of the next stock market sale whenever it comes. The next downturn should be bought up quickly given the outlook for 2025 and 2026 earnings growth. Plus, slower rate cuts indicate that the economy remains sturdy.
Thankfully, investors don't have to wait for the next pullback to find great stocks trading at huge discounts.
The two standout semiconductor stocks we dig into today trade over 40% below their highs heading into Christmas. Both Micron and AMD also offer exposure to the AI boom.
Buy Micron Stock Down Over 40% for Huge Long-Term AI Upside
Memory chip powerhouse Micron Technology, Inc. tanked following its disappointing Q1 fiscal 2025 results and guidance on December 18.
Micron cited a "weaker" near-term outlook for consumer-oriented markets as part of its downbeat Q2 outlook. But MU anticipates a return to growth for that area in the back half of its FY25.
The recent selloff came even though its AI growth remains stellar. Micron's AI-heavy data center revenue skyrocketed 40% sequentially and over 400% YoY, helping data center sales surpass 50% of its total revenue for the first time. "We continue to gain share in the highest margin and strategically important parts of the market and are exceptionally well positioned to leverage AI-driven growth," CEO Sanjay Mehrotra said in prepared remarks.
Micron has predicted AI will drive record memory chip demand, and MU is a key supplier of memory chips for Nvidia's industry-leading AI processors. MU is projected to grow its revenue by 44% in FY25 and 26% in FY26 to reach roughly $46 billion—adding $20 billion to the top line between FY24 and FY26.
Micron is projected to grow its adjusted earnings by 566% in FY25 and another 45% next year. These estimates will come down slightly once more analysts provide updated post-Q1 estimates.
Some of the downbeat earnings outlook has already been priced into Micron stock. On top of that, Micron has a strong balance sheet and pays dividends. Wall Street still loves the stock long-term, with 24 of the 29 brokerage recommendations Zacks has at "Strong Buys."
Micron stock is volatile, but it has climbed 740% in the past 15 years vs. Tech's 600%. This outperformance includes the AI chip stock's 43% fall from its summer 2024 highs. The downturn has Micron trading 70% below its average Zacks price target.
Micron is attempting to find support at its 2024 lows, which are nearly in-line with its 2021 and 2022 peaks. Valuation wise, MU trades at a 66% discount to Tech and miles below its highs at 9.1X forward earnings.
Micron's stellar earnings growth, mixed with its downturn, has it trading at a 90% discount to Tech in terms of its price/earnings-to-growth (PEG) ratio.
Buy Nvidia Rival AMD Stock Down Over 40% from Its Highs?
Advanced Micro Devices is a standout semiconductor company across GPUs and CPUs. AMD is attempting to gain AI chip market share against its GPU competitor and industry powerhouse Nvidia.
AMD grew alongside the rapid expansion of the gaming industry, data centers, and beyond over the past 10 years. AMD's revenue soared from around $4 billion in FY15 to nearly $23 billion last year.
AMD remains far behind AI chip leader Nvidia. Wall Street has dumped the stock since March as they fear it won't be able to catch Nvidia. But the AI pie is massive and AMD benefits immensely from the same megatrends as Nvidia.
AMD posted record revenue in Q3, driven by "higher sales of EPYC and Instinct data center products and robust demand for our Ryzen PC processors." The company also remains on track to deliver record annual sales in 2024, boosted by AI data center growth.
AMD might be the Pepsi to Nvidia's Coca-Cola in the AI chip market. But being No. 2 is still a fantastic place to be. AMD is projected to grow its revenue by 13% in 2024 and 26% next year from $22.68 billion in FY23 to $32.37 billion in 2025. AMD is expected to boost its adjusted earnings by 25% in 2024 and then expand its EPS by 48% in 2025.
AMD is streamlining its business after offering somewhat disappointing guidance last quarter. AMD is down 18% in 2024, lagging Tech's 30% climb, and it trades over 40% below its March highs. The AI chip stock's average Zacks price target offers 57% upside, and 31 of the 39 brokerage recommendations Zacks has are "Strong Buys."
AMD trades at a 30% discount to its five-year median at 28.9X forward earnings and not too far above Tech. Its strong earnings growth outlook, coupled with its downturn, has it trading at a 40% discount to Tech in terms of its PEG ratio.
AMD's strong comparative value is in place even though it skyrocketed over 4,400% in the past 10 years to blow away Tech's 322%. AMD stock is attempting to find support at its 200-week moving average while trading at some of its most oversold RSI levels of the past decade.
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5 Stocks Set to Double
Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>Advanced Micro Devices, Inc. (AMD) : Free Stock Analysis Report
Micron Technology, Inc. (MU) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
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