Furthermore, Micron is working on the next-generation 1-gamma DRAM production technology that uses extreme ultraviolet lithography and expects to use it for volume production in 2025. The company’s investments in transitioning from older nodes to advanced nodes and AI-powered smart manufacturing capabilities have helped boost yields for its high-performance memory chips.

Micron now expects its HBM, DDR5, and LPDDR5 offerings, and data center SSDs (solid-state drives use NAND flash memory) to rake in multiple billions of dollars in revenue in fiscal 2025.

Micron estimates the global HBM market to grow from $4 billion in 2023 to more than $25 billion in 2025. The company is targeting almost 20% to 25% share of the HBM market by 2025. While a relatively small target market, HBM chips are expensive, bringing in more profits for Micron. With Micron, SK Hynix, and Samsung being the only three major memory manufacturers targeting the HBM market, these chips enjoy significant pricing power.

Micron has also succeeded in developing technologically superior HBM chips. The company’s 12-high (12-high implies 12 memory layers are stacked together in the chip) output HBM3E chips consume almost 20% less power while providing 50% more DRAM capacity than the competitors’ 8-high output HBM3E chips. This is a major advantage since processors and DRAM chips account for a significant portion of the power consumption at data centers.

Micron has inked long-term agreements with customers for its HBM chips, and has already concluded pricing for calendar 2024 and 2025. This has resulted in impressive revenue visibility for its HBM business. The company has already earned several hundred million dollars of HBM revenue in the fourth quarter of fiscal 2024.

Furthermore, Micron is also developing next-generation HBM chips, including HBM4 and HBM4E. Since HBM4 technology will offer customization capabilities, these offerings can also differentiate Micron in the mass-produced memory market.

Micron has reported robust results in fiscal 2024, with revenue growing 62% year over year to $25.1 billion and the gross margin growing 31 percentage points year over year to 23.7%. The company also reported a non-GAAP net income of $1.47 billion in fiscal 2024, a dramatic improvement from a $4.86 billion loss in the previous year.

The company also boasts a strong balance sheet with $9.2 billion in cash and investments and $13.4 billion in total debt.

Micron has resumed its share repurchase program (which was suspended two years ago) in light of improving industry conditions. The company repurchased $300 million worth of shares in the fourth quarter.

Despite the many strengths and improving financials, the stock is trading at 4.6 times sales, far lower than the majority of semiconductor players. With Micron now working on differentiating its memory offerings coupled with a dramatic rise in demand, the company can surge significantly higher in the coming months.

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Manali Pradhan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Should You Buy Micron Stock After the Dip? Wall Street Has a Clear Answer for Investors. was originally published by The Motley Fool