Shares of Micron Technology (MU +3.43%) have been falling recently. Entering trading on Thursday, the stock’s valuation remained just above $1 trillion in market cap, but its price was just under $900, down 18% from its 52-week high of just over $1,089. The stock, however, is still sitting on some mammoth gains, with 12-month returns north of 680%.
Is this slowdown a good opportunity to buy Micron’s stock as it takes a breather, or could it be the beginning of a much larger sell-off?
Image source: Getty Images.
Why has Micron’s stock fallen suddenly?
There’s been softness in the tech sector this week, and Micron’s decline isn’t due to the company’s own performance. Micron didn’t announce anything significant recently, and its latest earnings results won’t be released for a couple of weeks. Instead, its recent dip may be more closely tied to broader concerns in the tech sector about rising valuations. Plus, the much-anticipated SpaceX IPO is coming on Friday, and investors may be eager to free up cash and sell stocks to take a position in Wall Street’s shiny new investment opportunity.
The good news for Micron investors is that, whatever the reason for the decline, it’s not a company-specific problem. The bad news, however, is that with its market cap still being reasonably high and the stock trading at more than 40 times earnings, Micron may very well represent just how frothy and expensive the market has been, particularly in tech. And if there is a broader market sell-off for a prolonged period, then Micron may have more room to fall, given how much it has surged over the past year.
Today’s Change
(3.43%) $30.62
Current Price
$922.50
Key Data Points
Market Cap
$1.0T
Day’s Range
$895.60 – $931.25
52wk Range
$103.38 – $1089.29
Volume
781.9K
Avg Vol
50.4M
Gross Margin
58.54%
Dividend Yield
0.06%
Micron is likely to recover, but investors should expect volatility
Micron’s business has benefited from insatiable demand for its memory products, and that trend is likely to show up again when it reports its latest earnings on June 24. The continually high tech spend on AI-related initiatives is why the stock may still rise further and recover from this dip, which may prove to be just a speed bump.
However, it’s also important to consider the risks associated with the stock, because while there is a shortage of memory products today and it’s expected to persist for the foreseeable future, things can change quickly in tech. Historically, this has been a cyclical tech area, and if more supply comes online sooner than expected or demand unexpectedly slows, those developments could quickly unravel the exciting growth story around Micron’s stock.
It’s a hot buy, and I do expect it’ll recover from this dip, but I also don’t think it’s a safe enough investment to simply buy and forget about. Investors who buy Micron should be aware of the risks and potential volatility that may come from owning the stock.
