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Micron-Valens Contract Unveils Centralized Storage Solution

Zacks Equity Research

Micron Technology MU in collaboration with ultra-high-speed in-vehicle connectivity provider Valens introduced the automotive industry’s first 1TB remote, centralized storage solution at CES 2020.

Through this partnership, both companies are enabling next-generation automotive platforms to facilitate  autonomous, advanced driver-assistance systems (ADAS) and disseminate in-vehicle infotainment (IVI).

Reportedly, Micron’s 1TB remote, centralized storage solution and Valens’ ultra-high-bandwidth data transmission will help meet myriad challenges in the automotive market by providing more flexibility and improved performances, ultimately, reducing the total cost.

Shares of Micron have soared 64.4% in the past year, outperforming its industry’s growth of 51.1% as well as the S&P 500 Index’s 24.6% rally. Notably, the stock scaled 8.78% to touch a new 52-week high of $58.4, eventually closing a tad lower at $58.27 on Jan 7.

One-Year Price Performance

What’s Driving Micron?

Micron is benefiting from a resurgence in DRAM demand, backed by a progress in customer inventory adjustments in the cloud, graphics and the PC markets.

Notably, the company’s first-quarter fiscal 2020 results gained from recovery in demand in the memory market.

Although the company’s performance on a year-over-year basis is not up to the mark, the stock’s sequential improvement makes us optimistic. Further, management’s positive commentary on the company’s performance beyond the current quarter is making investors hopeful.

The stock is expected to turn around in the fiscal third quarter with continued recovery in the second half of 2020. Meanwhile, management expects the seasonally weak fiscal second quarter to hit rock bottom due to financial downturn.

The recent spike in share prices can be attributed to a buzz of optimism among analysts regarding a sooner-than-expected turnaround in the memory market. Adoption of 5G smartphones that require more memory is likely to be a key driver in this regard.

Cowen analyst Kerl Ackerman recently noted that aided by a modest server upgrade cycle and 5G smartphone uptake, DRAM market is likely to rebound in the second half of 2020.  Notably, 5G is driving more than 50% content increases in premium-tier handsets. Further, given these positives, both DRAM demand and ASP are expected to witness an upswing.

Furthermore, the company’s sustained focus on developing new and more advanced technologies is a boon. The addition of the solution in association with Valen will help the company capitalize on the teeming opportunities in the automotive market.

Per Technavio, the global autonomous vehicles market is expected to see a CAGR of 41.61% during the 2018-2022 period. Moreover, per MarketsandMarkets, the ADAS market is projected to reach $91.83 billion by 2025, reflecting a CAGR of 20.96% between 2018 and 2025. These estimates encourage us about Micron’s prospects in the domain.

Micron Technology, Inc. Revenue (TTM)

Micron Technology, Inc. Revenue (TTM)

Micron Technology, Inc. revenue-ttm | Micron Technology, Inc. Quote

Zacks Rank & Stocks to Consider

Micron currently has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are Fortinet, Inc. FTNT, Synopsys, Inc. SNPS and ManTech International Corporation MANT, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Fortinet, Synopsys and ManTech is currently pegged at 14%, 12.56% and 8%, respectively.

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