Micron Stock Could Be Worth Buying Before Its Next Earnings Report

Micron's (NASDAQ: MU) business has been on an undeniable roll. The company's last quarterly report crushed expectations, with non-GAAP (generally accepted accounting principles) adjusted earnings per share of $33.42 on revenue of $54.23 billion, blowing past the average Wall Street target for adjusted earnings per share of $31.72 on sales of $51.07 billion.

Even better, the company issued guidance for the current quarter that crushed expectations. The memory chip leader said that it expects to post sales of roughly $61.5 billion in the current quarter and adjusted earnings of $38.15 per share. Meanwhile, the average Wall Street estimate had only targeted sales of roughly $57 billion and per-share earnings of $35.40.

Micron is expected to release its next earnings report sometime in December. Here's why the stock could be worth buying ahead of the company's next quarterly release.

Micron's recent wins haven't translated into valuation gains yet

Despite strong quarterly reports and very encouraging forward guidance, Micron stock has actually lost ground since its last quarterly report. The company's share price is now down roughly 25.5%, as of this writing.

There are a few big reasons for the company's valuation pullback. For starters, the stock has seen massive gains over the last year even after some recent sell-offs. Investors have also become less confident in the macroeconomic backdrop due to factors including sticky inflation, elevated bond yields, and the likelihood of further interest rate hikes. Adding another complicating factor, the market is concerned about the impact of competition from Chinese memory companies on Micron's pricing power.

While the potential for macroeconomic conditions to worsen and increased competition pose meaningful risks to Micron stock, the company is likely to deliver another stellar report when it releases earnings in a couple of months. Micron has been building an impressive track record of earnings beats, and there's a good chance that its sales and earnings will once again blow past its guidance ranges. Demand for Micron's high bandwidth memory (HBM) chips for artificial intelligence processors is incredibly high, and there's little indication that pricing power will slip in the near future.

Micron's next quarterly report also roughly coincides with an upcoming major shift in the company's capital return policy. Due to the terms connected with the company taking a loan through the CHIPS Act in 2024, Micron has been prevented from buying back its own stock for two years.

That restriction is now on the verge of lapsing, and the company is gearing up to return a massive amount of cash to shareholders. Most of this will take the form of stock buybacks, but it also wouldn't be surprising to see the company announce a huge dividend increase at some point in December.

With Micron's business momentum looking incredibly strong and the company set to buy back $35.16 billion of its own stock and potentially announce a major dividend increase, buying the company's shares amid recent volatility could be a good move.

Keith Noonan has positions in Micron Technology. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.