2 Stocks Down 34% and 42% to Buy Right Now
With just over a month to go in 2024, it’s fair to say that it’s been a good year for stocks. The S&P 500 index’s level has risen 26% across the stretch, and the more growth-oriented Nasdaq Composite index has rocketed 42% higher.
While a powerful bull market is in swing and some companies are rocketing to new highs, there are still high-quality growth stocks out there that are trading far below previous valuation peaks. With that in mind, read on to see why two Motley Fool contributors think these stocks are good buys while they’re still down big from their highs.
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Keith Noonan: Like some other high-profile chip companies, Micron Technology (NASDAQ: MU) has seen increased sales and profits, thanks to artificial intelligence (AI) trends. The company is a leading provider of memory solutions, and rising demand for storage that can hold the data for AI applications has driven revenue higher.
Sales increased 93% to hit $7.75 billion in the fourth quarter of the company’s last fiscal year, which ended Aug. 29. Even better, much of the sales growth was driven by high-margin DRAM and high-bandwidth-memory (HBM) solutions.
Thanks to surging sales and improving gross profit margins due to a better sales makeup, the business managed to record a non-GAAP (adjusted) net profit of roughly $1.34 billion. For comparison, the business posted an adjusted loss of $1.18 billion in the prior-year period.
Management also expects continued improvement in the near term. For the first quarter of its current fiscal year, Micron expects sales of roughly $8.7 billion — good for growth of roughly 84% year over year and 12% on a sequential quarterly basis. The company’s adjusted gross margin is also projected to improve to roughly 39.5% — up from 36.5% last quarter.
The stock’s performance has been uneven. Its gain of 18% has lagged significantly behind the 26% rally for the S&P 500 this year. And the memory-chip specialist is still down 34% from its high. There’s a reason why the stock isn’t trading at all-time highs despite great results.
The memory chip industry is highly cyclical, and performance is impacted by macroeconomic conditions and more specific shifts and cycles in the consumer and enterprise markets. The timing of these cyclical shifts can be difficult to predict, and charting Micron’s business performance involves a high degree of speculation because of this. Some analysts are betting that enterprise demand for HBM solutions will weaken and softness in the consumer market will also depress performance.
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