Fresh off a $20-a-share drop Tuesday, shares of Micron (MU +4.84%) bounced back strongly Wednesday morning -- and investors can thank Seagate Technology (STX +7.91%) for the bump. Seagate blew past analyst forecasts last night, reporting $4.10 per share in non-GAAP earnings instead of $3.48. Sales of $3.1 billion likewise beat expectations for less than $3 billion.
Investors are exuberant, and they're buying all the computer memory stocks they can find this morning.
Image source: Getty Images.
What Seagate's good news means for Micron
Strange as it sounds to say it, Micron stock got beat up yesterday after The Wall Street Journal reported that OpenAI is spending too much money on artificial intelligence chips and the high-bandwidth memory to support them. But today, the better story is becoming clearer: "too much" spending on memory is just right for companies that sell memory -- like Micron and Seagate.
In last night's report, Seagate reported 44% year-over-year sales growth, a 12-percentage-point increase in operating profit margin to 32.1%, and GAAP earnings per share more than doubled to $3.27. Even better news for Seagate (and Micron), it turns out the market for memory is so strong right now that Seagate was able to raise its guidance:
Instead of the less than $4 a share Wall Street thought it would earn this year, Seagate now expects to earn $5 a share.
NASDAQ: MU
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What's next for Micron stock?
Seagate CEO Dave Mosley says we're entering "a new era of structural growth as AI applications amplify data creation and support sustained storage demand." That sounds like great news for Seagate, and for Micron stock as well.
And the best reason of all to buy Micron? Seagate stock costs more than 32x forward earnings right now.
Micron still costs less than 9x.
