I think it’s official now: Micron (MU +4.39%) is a momentum stock.
Granted, it’s not an ordinary momentum stock, one that just goes up and up primarily on positive headlines, but without revenue or earnings numbers to back up the rally. Fact is, Micron does have revenue and earnings growth. Sales surged 196% last quarter, and Micron’s earnings were up 771%.
But Micron also has positive headlines in abundance. That’s why the stock is up another 4.3% through 10:10 a.m. ET today.
Image source: Getty Images.
What CNBC says about Micron
In a leading story this morning, CNBC profiled Micron’s “unstoppable” rise, with shares up 147% so far this year. Customers are “scrambling” to buy computer memory chips, says CNBC, and competing with one another to buy what chips are available — whatever the price.
Micron’s gross profit margin this year is expected to be above 75%. (For comparison, even Nvidia (NVDA +2.79%) earnings on a 71% margin!) This is creating a “supercycle” in memory chips and leading to “windfall” profits for Micron.
Is it any wonder, then, that Micron has become one of the “most hyped stocks on social media?”
Today’s Change
Current Price
Keep a long term perspective on Micron
It is no surprise at all. What worries me, though, is what happens when this supercycle ends.
After all, “super” or not, analysts still recognize that today’s high prices are just part of a cycle in the historically cyclical semiconductor industry. Just as we’ve seen competitors emerge to challenge Nvidia’s dominance in artificial intelligence chips, hoping to win a piece of Nvidia’s margins, we’ll see the same thing happen to Micron eventually.
It may not happen today. It might not even happen this year. But it will happen eventually.
And once it happens, look out below.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology and Nvidia. The Motley Fool has a disclosure policy.
