Micron Technology (MU 5.97%) has been around for nearly 50 years, fine-tuning its expertise in memory and storage and delivering progressive earnings growth. But over the past few quarters, this well-established market giant has seen revenue and its stock price take off -- in the style of a young start-up.
In the most recent quarter, Micron's revenue soared 196%, and this year, the stock has surged a mind-boggling 280%. The reason for such gains? Micron plays a key role in the artificial intelligence (AI) story. AI requires chips to fuel the training and use of models, but for this to unfold, it needs memory and storage capabilities -- and that's where Micron comes in. In fact, as the AI growth story shifts from the training of models to the actual use of AI in the real world through AI agents, memory demand may grow even stronger.
So there's reason to believe that Micron, which trades at about $1,000 today, will see that price climb even higher. Considering all of this, my prediction is Micron's next big move will be the following...
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Micron's record earnings
Before I get to that, however, let's take a quick look at Micron's latest news. The company reported earnings back in March and delivered records across revenue, earnings per share, gross margin, and free cash flow. And the company said it expects to deliver additional records when it reports fiscal third-quarter earnings on June 24.
The reason behind this is simple: Demand for its memory and storage products, from AI customers, is exploding higher. In fact, it's so high that even the presence of rivals isn't impacting growth. At the moment, there's plenty of room for several memory companies to succeed. The main element holding Micron back from even greater levels of growth is tight supply, and this is something the company expects will continue through this year. But even facing this challenge, Micron has excelled, and investors have applauded the company by rushing to buy the shares.
Now, let's consider my prediction. What will be Micron's next big move? I predict that, during the upcoming earnings report, Micron will announce a stock split. Why? For a couple of reasons. First, the stock has reached a level that could represent a psychological barrier for some investors. Even though, trading at 18x forward earnings estimates, Micron isn't particularly expensive, some investors may see the price tag of $1,000 as lofty and hesitate to invest.
NASDAQ: MU
Key Data Points
Micron stock at $1,000
Second, at $1,000, Micron may not be accessible for certain investors. If investors have a lower investing budget and their brokerage doesn't offer fractional shares, they probably won't consider Micron stock.
Finally, Micron clearly is optimistic about the future. In the latest earnings report, the company lifted its quarterly dividend by 30%, saying the move reflects "confidence in the sustained strength of our business." A decision to launch a stock split would offer investors an additional sign of confidence, as it suggests that management believes the stock has what it takes to climb again from a new, lower price.
Will a stock split change anything for you if you're a shareholder or potential shareholder? As mentioned, if you're on a specific budget, a split could make it easier for you to get in on the stock or open a position. In a stock split, the company distributes more shares to current holders, but the value of their total investment and the market value of the company remain unchanged. So stock splits don't change anything fundamental about the company or its stock -- and don't act as a catalyst for stock performance.
That said, investors generally like stock splits, so a potential announcement of one could be well-received and offer the stock a temporary lift.
Of course, no one knows for certain what Micron will do next. But my prediction is that a stock split could be a very logical next step for this high-growth AI player.
