Micron Technology (NASDAQ:MU) wavered last week, even though the company published strong financial results showing that its revenue and profits continued to soar amid the artificial intelligence boom. It ended the week at $1,075, down by 14% from its all-time high.
Micron Technology May Announce a Huge Share Buyback
A potential catalyst that may boost Micron’s shares in the coming months is a big repurchase program. That’s because the company has one of the best balance sheets in the United States and is also highly undervalued.
The company ended the last quarter with over $73 billion in cash, equivalents, and long-term marketable securities. It also ended the quarter with $491 million in current debt and $4.6 billion in long-term debt. As such, its net cash is about $68.5 billion.
In its earnings report, Micron’s management said it would continue repurchasing shares under its current program, which has about $2.2 billion remaining. This authorization is a tiny one for a company valued at over $1 trillion.
Micron is limited on the amount of money it can use to repurchase its stock since it is a participant in the CHIPS program. It is using funds in this program to build a large plant in New York.
Fortunately, the restrictions are set to end on December 9, giving the board the leeway it needs to restart purchases. As a result, Micron will likely announce a large repurchase, with Bank of America (NYSE:BAC) analysts expecting a $37 billion buyback in 2027. The actual figure could be even higher.
Micron Has Become a Free Cash Flow Machine and a Bargain
The repurchase will be justified by its strong free cash flows, which jumped by over $63.8 billion last year. This figure will keep growing this year as long as the artificial intelligence boom continues. Indeed, analysts expect the company’s annual revenue to rise by 106% this new financial year to $274 billion, followed by $314 billion next year.
At the same time, Micron has become a bargain, with the forward price-to-earnings ratio being 6.09, much lower than the technology sector median of 23.5. It is also much lower than the five-year average of 74. As such, announcing a large buyback will be one way of deploying capital and potentially boosting the stock.
Just last week, Nvidia (NASDAQ:NVDA) announced a $150 billion share repurchase program, bringing the total authorized figure to over $230 billion.
Share repurchase programs help boost share prices by reducing the number of shares in circulation, which raises earnings per share. They also help to signal that management is optimistic about the company.
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