Micron Technology’s stock has taken a hit over the past six months, plummeting 36.1% and now trading at $84.79. This move has left many investors wondering if it presents an opportunity to buy or a risk to their portfolio.
Our analysts have identified three key reasons why Micron’s fundamentals are a concern:
Firstly, its long-term revenue growth has disappointed, growing at only 7.1% compounded annually over the past five years, which is below the semiconductor sector average. This cyclical industry often experiences periods of high growth followed by contractions.
Secondly, Micron’s gross margin is one of the lowest in the industry, indicating a highly competitive market and lack of pricing power. The company’s gross margin averaged 14.7% over the last two years, meaning it paid suppliers $85.31 for every $100 in revenue.
Lastly, Micron’s cash burn has raised concerns about its ability to return capital to investors. Despite breaking even on free cash flow this quarter, its free cash flow margin averaged negative 9.8%, indicating a significant drain on resources.
Given these fundamentals, our analysts are avoiding Micron for now and suggest looking at alternative investments like Wabtec, which is benefiting from an upgrade cycle in the locomotive services industry.
Source: https://finance.yahoo.com/news/three-reasons-avoid-mu-one-090516097.html