Micron's share price experienced a significant decrease of 16% on this specific day.
Computer memory manufacturer Micron (MU with a 2.47% increase) saw a significant drop of 16.5% in its stock price before 9:45 a.m. ET on Wednesday, despite the company meeting or surpassing the financial expectations set by analysts during the first quarter of 2025.
Predicted to yield a profit of $1.77 per share on $8.7 billion in sales, Micron reported earnings of $1.79 per share on sales of $8.7 billion billion, surpassing both sales and profit projections, although by a slim margin.
Micron's Q1 Financial Report
Micron's news was not all positive. The company reported earnings of $1.79 per share after deducting one-time expenditures (non-GAAP earnings). However, according to generally accepted accounting principles (GAAP), Micron only reported earnings of $1.67 per share.
Even so, this was an improvement compared to the GAAP net loss Micron recorded in Q1 of the previous year and more than double the GAAP profit Micron earned in the previous quarter (Q4 of 2024). Micron's sales for Q1 also increased by 85% compared to the same period the previous year, primarily driven by an explosion in revenue from its data center business (cloud computing and artificial intelligence). Data center revenue increased by 40% between quarters and a staggering 400% year over year!
Micron CEO Sanjay Mehrotra highlighted the company's data center business, which now accounts for over half of its total revenue, and stated that the company continues to gain market share in this "critically important" sector.
Should I Sell Micron Stock?
So, why are investors selling Micron stock today? In a nutshell, it's the outlook for the future.
Micron informed investors that they anticipate quarterly revenue of $7.9 billion in Q2 of 2025, along with a gross profit margin of around 37.5%, which translates to earnings per share of approximately $1.26 (GAAP) or $1.43 (non-GAAP). And here's the problem:
Analysts anticipated Micron to forecast significantly higher revenue and profit: $9 billion in sales and $1.97 per share in profit. Granted, these are non-GAAP figures. But by stating that it will fall short of this prediction by around 28%, Micron has raised concerns among investors.
Nevertheless, even the $1.26 that Micron is still promising corresponds to a 200% year-over-year increase in earnings per share. Given its current valuation, priced under 25 times earnings, Micron stock appears undervalued.
Despite Micron's strong performance in Q1, with increased sales and earnings surpassing expectations, the company's forecast for Q2 revenue and profit fell short of analysts' expectations, causing a drop in investor confidence and resulting in a decrease in Micron's stock price. In light of the financial report, some investors are considering whether to sell Micron stock, as they believe the company may not meet their expectations for future growth in the second quarter of 2025.
While the company's financial performance has been positive, with significant improvements in both GAAP and non-GAAP earnings, and with data center revenue driving a majority of its sales, investors are focusing on the potential for future growth and are concerned about Micron's ability to meet the high expectations set by analysts.
Investors who are considering selling Micron stock may be looking for alternative investments with a higher growth potential or greater stability, as they assess the company's financial outlook and its position in the market.
