Why Micron stock is soaring today

Shares of a computer technology company Micron technology (NASDAQ:MU) rose more than 15% midday Thursday following the release of fourth-quarter results on Wednesday evening, but the stock's biggest one-day gain in over a decade was largely due to its upbeat guidance for the current quarter.

Micron is running at full speed

Micron Technology turned revenue of $7.75 billion into operating earnings per share of $1.18 in the three months to the end of August. Both figures are well above the year-ago figures of $4.01 billion in revenue and $1.07 in loss per share, although it should be remembered that the year-ago economic environment was (very) weak. Perhaps more importantly, both of the latest quarter's figures exceeded analysts' expectations of $7.65 billion in revenue and $1.11 in earnings per share.

The main reason for the strong result is continued demand for high-bandwidth memory chips used in artificial intelligence (AI) computing platforms.

That strength isn't likely to fade anytime soon. Micron's revenue forecast for the first quarter of fiscal 2025 is currently $8.7 billion, in the middle of the suggested range, while analysts were expecting just $8.27 billion. The company also expects earnings per share of $1.74 – plus or minus $0.08 – while analysts had forecast an average of $1.52 per share.

CEO Sanjay Mehrotra further said in Wednesday's fourth-quarter press release: “We forecast record revenue in the first quarter of the fiscal year and a significant revenue record with significantly improved profitability in fiscal 2025.”

Value outweighs volatility

The optimistic reaction to the unexpectedly pleasant surprise is impressive, but also intimidating.

It's not often that a stock jumps 15% in a single session and then reaps more immediate gains. And in this case, Thursday's surge has pushed Micron shares more than 30% above their early September lows. The sheer magnitude of such a move, coupled with the gap left by today's opening jump, makes it even harder for the stock to keep rising… at least not without some sort of pause first.

If you're interested in owning a piece of this tech company, don't wait too long. The stock is also still well below its June high and is fairly valued at 12.6 times this fiscal year's earnings estimate of $8.79 per share. In fact, continued demand for AI technology is expected to drive Micron Technology's earnings per share to $12.91 next fiscal year. The stock trades at just 8.5 times that amount, which is dirt cheap by almost any metric.

The story continues

The biggest concern for risk-taking growth investors is simply the extreme volatility that is sure to continue.

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James Brumley does not own any stocks mentioned. The Motley Fool does not own any stocks mentioned. The Motley Fool has a disclosure policy.

Why Micron Stock Is Soaring Today was originally published by The Motley Fool