Micron Q1: Downward Revisions Reset Valuation Multiples, Expecting Demand Recovery In H2 FY2025

Summary:

• Micron’s 1Q FY2025 earnings report triggered a sharp selloff, with the high end of 2Q guidance significantly below the market estimates.
• The revenue and margin weakness was driven by sluggish demand in consumer-oriented markets, which dragged down NAND revenue; however, the company expects a demand rebound in 2H FY2025.
• Management hinted that gross margin pressure could persist into 3Q FY2025 due to NAND headwinds.
• The company raised its FY2025 capex outlook, with capex as a percentage of revenue increasing by 5% compared to the previous outlook, prioritizing the DRAM and HBM segments.
• Valuation multiples have expanded due to recent downward earnings revisions but remain attractive, with the stock trading at a non-GAAP PEG of 0.36x, making it a solid “growth at a reasonable price” pick.

What Happened

Micron’s (NASDAQ:MU)’s stock dropped nearly 20% following a disappointing 1Q FY2025 earnings report. Revenue for the quarter was nearly in line with consensus, but the outlook for 2Q FY2025 fell significantly below market expectations, primarily due to weakness

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