It is now a well-known fact that semiconductor stocks are generally volatile in nature, and Micron Technology, Inc. (NASDAQ:MU) has followed a similar pattern. In the past, the Micron stock has gone through prolonged slumps in the aftermath of a sales cycle, and the current slump could drag on far longer due to the chaos unleashed on the markets by the coronavirus crisis.
That being said, it should be noted that Micron is now in better shape than it had been in the past years, and hence, it is important to take a closer look at the stock.
First of all, it should be kept in mind that the company is currently going through a bit of a downturn. However, despite the drop in sales, the company remains profitably, and that is something that most investors are likely to take note of. In the past, the company had performed much worse during such slowdowns. One of the major reasons behind the change in fortunes for Micron has been the company’s inclination to walk away from less profitable propositions and instead to go for those deals that actually boo the company’s bottom line.
The fact that it has come up with innovative products like the 3D XPoint memory architecture and NAND chips has given it the power to concentrate on deals that prove to be more profitable. Micron has also managed to reduce its debts considerably. By the end of February this year, it had cash and cash equivalents of $7.12 billion, while the debts had been brought down to $5.19 billion.
At this point in time, the stock is trading at 22.9 times its trailing one year EPS (earnings per share). The multiple has gone up in recent months, and it is quite clear that it does not make the Micron stock particularly cheap. However, it should also be noted that the most opportune time for investing in a stock like Micron is when it is going through a downturn. Investors could keep an eye on Micron stock over the coming weeks.