What happened

Shares of Micron Technology (NASDAQ:MU) gained 18.3% in June 2019, according to data from S&P Global Market Intelligence. The maker of DRAM and NAND memory chips posted a surprisingly solid third-quarter report near the end of the month, sending share prices more than 14% higher in a single day.

So what

Micron's third-quarter sales fell 39% year over year to land at $4.79 billion. Adjusted earnings plunged 67%, stopping at $1.05 per diluted share. As gloomy as those year-over-year comparisons might look, analysts had been expecting worse. In particular, Micron crushed the Street's bottom-line consensus estimate of $0.79 per share.

Furthermore, management provided an update on Micron's relationship with Chinese technology giant Huawei, which has been blocked from doing business with American companies. That blacklisting could turn off the spigot to as much as 13% of Micron's annual sales, but the company has found a loophole that allows it to ship a limited number of chips to Huawei. That revelation lifted some weight off of Micron's share price.

Close-up shot of a NAND memory chip, sporting Micron's corporate logo in grey on black.

Image source: Micron Technology.

Now what

The Huawei workaround might not hold up if the Trump administration expands its sanctions on Huawei, but the entire issue would also go away if and when the trade tension between Beijing and Washington ends. Holding your breath while betting on either one of those outcomes could be hazardous to your health.

Meanwhile, memory chip prices continued to fall in the third quarter, but Micron's management insists that NAND prices should stabilize in the second half of calendar year 2019.

Amid all of this uncertainty, Micron's stock rides a volatile roller coaster. Its shares are now trading 43% above their annual lows but also 30% below 52-week highs. Personally, I'm convinced that Micron is undervalued at 4.7 times trailing earnings and 7 times free cash flows. This stock is priced for total disaster, which looks like an unlikely outcome. This is just one more cyclical downturn, surely to be followed by another big bounce when the market pressures subside.