Micron Technology (NASDAQ: MU) stock price jumped almost 2x from $32 at 2018 end, to almost $62 currently, primarily due to favorable changes in its P/S multiple. This comes as a surprise as the company has witnessed only a marginal rise in revenues over this period, and a slight drop in the outstanding share count. Despite this, the stock has managed to outperform the S&P, which returned roughly 55% over this same time.
In our interactive dashboard, Why Micron Technology Stock Moved: MU Stock Has Gained 94% Since 2018, we break down the factors behind this move.
1. MU’s Total Revenue has grown just 6.6% from $30.4 billion in 2018 to around $32 billion on an LTM basis
- MU’s total revenue first dropped from $30.4 billion in FY ’18 (MU’s fiscal year ends in August) to $21.4 billion in FY ’20, due to the semiconductor supply glut initially hurting demand, followed by the pandemic which caused supply chain disruptions.
- Revenues then soared to $27.7 billion in FY ’21, and currently stand higher at over $32 billion on an LTM basis.
- DRAM semiconductor sales make up the bulk of Micron’s revenues, with $20 billion of the company’s sales coming from DRAM semiconductors as of FY ’21, making up more than 70% of total revenue.
- For additional details about MU revenues and comparison to peers, see Micron Technology Revenue Comparison
2. Revenue per share rose 10% from $26.38 in 2018 to $29.11 currently
- MU revenue rose from $30.4 billion in 2018 to $32.4 billion currently, while the outstanding share count decreased from 1.2 billion in 2018 to around 1.1 billion currently.
- Due to this, RPS has risen around 10% from $26.38 in FY ’18 to $29.11 currently.
3. Price-To-Sales (P/S) multiple for Micron jumped from 1.1x in 2018-end to 3.7x by 2020 end, but has pulled back to around 2.1x currently, still around 90% higher than its 2018 level
- Despite Micron’s subdued performance between 2018 and 2020, its P/S multiple rose strongly from 1.1x in 2018-end to as high as 3.7x by late 2020, on the back of rising investor expectations.
- However, due to the increased economic uncertainty weighing on the broader markets, the P/S multiple has pulled back, currently standing at around 2.1x, still 92% higher than its 2018 level.
- For additional details about the company stock returns and comparison to peers, see Micron Technology Stock Return Comparison.
With inflation rising and the Fed raising interest rates, Micron Technology
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