For what seemed like a very long time until a few months ago “value” was pretty much impossible to find on the stock market. A sudden rise in COVID lows, fueled in part by historically loose monetary and fiscal policy, meant that most stocks were priced to include all possible good outcomes, with P/Es of all main indexes well above historical. averages. Then, around the start of this year, prices started falling as the Fed changed its tune, but that decline has yet to be offset by falling corporate earnings. In fact, profits continued to grow. As a result, the multiples are, as these things tend to be, averaged. Consequently, there are now pockets of value to be found, even after a rebound over the past two weeks.
In December, I highlighted three big tech stocks that I think would do well in 2022 based on the seemingly inexorable global shift to automation and big data. Of course, being “tech,” stocks were all hit earlier this year as the selloff was led by that sector. Two of them, IBM (IBM) and Apple (AAPL), have already recovered and are trading above their levels when I wrote this article. If I were to deploy cash now, my pick of the three would be whichever is still lagging, even after reporting another strong quarter yesterday afternoon.
Micron Technologies (MU) has been one of my favorite stocks for years. The stock’s price sensitivity to fluctuations in the commoditized memory market made it a good “swing trade” instrument that moved consistently within defined ranges for long periods of time. I said in December, however, that my view of the stock had changed and was now more of a long-term buy and hold goal. It was true then, and it’s even truer now at a lower price.
At the time, I listed rear and front P/Es of 16 and 9, respectively, and a PEG ratio of 1.0 as indications of value. Now, after continuing to beat revenue and earnings expectations, the stock has a P/E of around 12, a forward multiple just below 9 and a PEG ratio of around 0.9. All of this screams value, even after the pop that will come today after earnings. But most important in many ways is management’s confirmation in their comments of the trends I identified in December, trends that will drive even more growth for years to come.
CEO Sanjay Mehrota said on a conference call following the release that the data center business was central to their success last quarter, and that “We expect underlying demand for the 2022 calendar to be driven by increased volume of data center server deployments, 5G mobile shipments and continued strength in the automotive and industrial markets. »
Unless you think data collection and analysis is just a fad or a really major crash and recession is imminent, so MU who anticipated and preempted this data center trend is almost a “must have” stock for a few years. .
Above all, its current price, earnings multiple and outlook combine to make it this thing that has been so rare in the stock market for so long – good value in the traditional, measurable sense, which is good enough for me.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.