Prediction: This Will Be the Next $1 Trillion Company
Key Points
Micron is thriving from soaring memory chip prices.
Demand doesn't seem to be decreasing anytime soon.
Only about a 10% rise will get the shares over the hurdle.
- 10 stocks we like better than Micron Technology ›
The $1 trillion club used to be fairly exclusive. Now, it's becoming a lot more crowded. As of the time of writing, 13 companies worldwide have breached the $1 trillion market value threshold.
Yet, there's one right on the doorstep of being admitted: Micron Technology (NASDAQ: MU). It's about a $900 billion company right now, so it only needs a bit more than a 10% move to join the $1 trillion club. However, Micron's stock has been so hot in the past few weeks that this move could happen in a matter of days.
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Micron has been an incredible investment story, but is it still worth buying after its amazing rally? Let's take a look.
Image source: Getty Images.
Micron is thriving off the memory shortage
Micron makes memory chips, which have been in short supply recently. Memory is an important part of any computer, whether it's your PC, smartphone, or an artificial intelligence (AI) data center. AI has been a huge consumer of memory, and it's reached the point where there is a global shortage of memory chips.
There isn't a ton that separates one memory chip manufacturer from another, so the market is fairly commoditized. As a result, when demand is high and supply is low, the price goes higher. That's exactly what we're seeing right now with every memory chip manufacturer, and each is pricing off of sky-high memory prices.
Micron is one of the largest manufacturers of memory and is seeing its revenue rapidly rise. Two quarters ago, its revenue was $13.6 billion. Last quarter, it was $23.9 billion. Next quarter, management expects $33.5 billion. Adding $10 billion per quarter when the base was around $10 billion is no easy feat, but that's what Micron is doing. Additionally, its margins on its products are soaring because it can charge a higher price.
MU Revenue (TTM) data by YCharts
The future is also bright for Micron. During its latest conference call, management noted it only has enough capacity to meet half to two-thirds of total memory demand. Combine that with the fact that the memory chip market for data centers is expected to expand from $35 billion in 2025 to $100 billion in 2028, and it appears this shortage will be around for a while. Micron and its peers are working on getting more production up and running, but it may be a few years before they can get more fabrication facilities open to meet demand.
This makes it fairly obvious that Micron's run is just getting started. While it's nearly a $1 trillion company now, don't be surprised if it continues its march higher due to high demand.
Should you buy stock in Micron Technology right now?
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Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.
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