We recently compiled a list of the 12 Most Undervalued Tech Stocks to Invest in Now. In this article, we are going to take a look at where Micron Technology, Inc. (NASDAQ:MU) stands against the other undervalued tech stocks.
Will Tech And AI Be The Driving Force in 2025?
Katrina Dudley, global equity portfolio manager at Franklin Templeton Investments joined CNBC on December 31, 2024, to discuss which sectors are expected to continue with their gains in 2025. She mentioned that it is important to understand what sectors performed well last year to predict the future performance of the market. Dudley highlighted that technology was one of the sectors that worked well last year followed by some utility sector companies. The utility sector companies that performed well were mostly those power-producing companies that experienced increased demand due to AI. She emphasized that one of the themes she believes is secular and will continue to perform is the AI and the technology sector.
While talking about the high valuations of technology and communication services sector, Dudley acknowledged that these sectors are trading at lofty valuations above the S&P 500 index. However, she emphasized that valuations have never been a reason to sell something. It is important to unpack what high valuations are telling about the industry. She thinks that valuations at the moment reflect the number of things that the market is getting right. For instance, the earnings growth for these sectors has been positive, which is very different from the infinite bubble scenario. Moreover, the second contributing factor to higher valuations as explained by Dubley is the network effect, which is driving returns to the biggest players in the industry. Concerning these two points, she thinks there is a good rationale behind the tech stocks’ high valuation.
Dudley also highlighted that one of the ways the valuation multiple can come down is when these companies grow their earnings ahead of market consensus. This she believes is one of the risks that the market should be cognizant about. As earnings growth for any company is difficult to predict and when the market is expecting the company to deliver earnings growth there is always a risk of mis-execution. Therefore these high valuation companies need to deliver on earnings growth. Dudley mentioned that she is not worried about the valuations however it is something that she would be watching closely.
Our Methodology
To compile the list of the 12 most undervalued tech stocks to invest in now, we used the Finviz stock screener, Seeking Alpha, and Yahoo Finance. Firstly, we aggregated a list of tech stocks trading under the Forward P/E of 15 with positive earnings growth expected this year. Next, we cross-checked the Forward P/E ratio of each company from seeking alpha and expected earnings growth from Yahoo Finance. Lastly, we ranked the stocks based on the number of hedge fund holders of each stock, sourced from the Insider Monkey Q3 2024 hedge funds database. Please note that the data for this article was collected on January 17, 2025.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up view of a computer motherboard with integrated semiconductor chips.
Micron Technology, Inc. (NASDAQ:MU)
Forward P/E Ratio: 14.82
Earnings Growth: 369.66%
Number of Hedge Fund Holders: 107
Micron Technology, Inc. (NASDAQ:MU) is a prominent player in the storage solutions industry. The company manufactures various types of storage devices including DRAM, NAND, NOR Flash, and SDDs. It stands out in a competitive industry based on its portfolio of patent storage technology and innovation. The company has been actively engaged in developing High-Bandwidth Memory and Low-Power DDR5X Solutions to increase its market share by 2025.
On December 16, 2024, JPMorgan reiterated its Overweight rating maintaining its price target of $180 for Micron Technology, Inc. (NASDAQ:MU). Analysts at the firms had predicted that the company would surpass revenue and EPS estimates for the fiscal first quarter of 2025. The expectation stood true as the company delivered an EPS of $1.79 beating the estimates by $0.02 and revenue of $8.71 billion (84.3% increase year-over-year) was also ahead of market consensus by $11.74 million. The revenue growth was driven by a better product mix and strong shipments related to NVDA’s H200 platform.
In addition, management has also been expanding its facilities with new investments. On January 8, Micron Technology, Inc. (NASDAQ:MU) announced a significant expansion project by breaking ground on a new High-Bandwidth Memory (HBM) advanced packaging facility in Singapore. The new facility is aimed to meet the increasing demand for memory solutions required by artificial intelligence and data centers. The company ranks as the most undervalued tech stock to invest in now.
Delaware Ivy Core Equity Fund stated the following regarding Micron Technology, Inc. (NASDAQ:MU) in its Q3 2024 investor letter:
Micron Technology, Inc. (NASDAQ:MU) – Fundamentals here also appear solid though concern about global demand for handsets and PCs drove the shares down during the quarter. We expect Micron to be a significant beneficiary of growth in AI demand as investment in new data centers is extremely memory (semiconductor) intensive.”
Overall MU ranks 1st on our list of the most undervalued tech stock to invest in now. While we acknowledge the potential of MU as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MU but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.
