Should you buy Nasdaq stock Micron for your ISA after second-quarter profits exploded?

It is honest to say that Nasdaq chip inventory micron (NASDAQ:MU) is sizzling proper now. It has soared about 350% over the previous yr amid an AI-related reminiscence “supercycle.”

Effectively, sadly I utterly missed out on these explosive earnings. Nonetheless, are tech shares price shopping for for my ISA?

explosive earnings

Final evening (March 18), Micron introduced its fiscal 2026 second quarter earnings. They usually have defied Wall Avenue’s expectations.

Income for the quarter was a file excessive, growing 196% year-over-year to $23.86 billion. In the meantime, adjusted earnings per share have been $12.20, in comparison with $1.56 within the year-ago interval (up 682% year-over-year), considerably exceeding the consensus estimate of $9.31.

Commenting on the earnings, CEO Sanjay Mehrotra mentioned:Within the age of AI, reminiscence has develop into a strategic asset for purchasersHe added that the corporate expects:One other vital file achieved within the third quarter”

Trying extra intently at its steering, the corporate mentioned it expects third-quarter gross sales of $33.5 billion ± $750 million (representing greater than 250% year-over-year development) and diluted earnings per share of $19.15 ± $0.40. This steering was properly forward of expectations, as analysts had anticipated earnings of $12.05 per share on income of $24.3 billion.

Inventory nonetheless seems low-cost

Micron is clearly a beneficiary of the AI ​​growth. What’s occurring is that demand for reminiscence is skyrocketing on account of elevated demand for GPUs manufactured by firms resembling: Nvidiagenerative AI fashions require reminiscence to function.

What’s fascinating is that the inventory nonetheless seems very low-cost. At the moment, the ahead price-to-earnings ratio (P/E) is simply 7.3x, based mostly on subsequent fiscal yr’s earnings estimates (although this estimate might rise given the corporate’s present momentum).

Be aware that a number of Wall Avenue corporations raised their value targets on the corporate’s inventory following final evening’s outcomes. each JP Morgan and TD Cowen have a goal of $550, about 24% above the present share value.

What are the dangers?

Nonetheless, whereas there’s plenty of pleasure right here, there’s additionally appreciable threat. One is that the reminiscence enterprise has a enterprise cycle.

So whereas Micron’s earnings are at the moment surging, issues might change rapidly. Be aware that Micron’s income declined sharply yr over yr in 2016, 2019, and 2023.

Within the quick time period, the AI ​​growth ought to help demand. However issues might get even worse if huge tech firms cease spending on Nvidia’s GPUs.

One other drawback is that Micron instructed buyers that capital funding isStep up meaningfullyWith construction-related prices growing by greater than $10 billion in fiscal 2027, this kind of capital funding can damage earnings.

After all, after the inventory value has risen 350% over the previous yr (the chart is so parabolic it is scary), there’s all the time an opportunity of revenue taking sooner or later (perhaps even as we speak). That is additionally a threat to think about.

my present actions

All issues thought of, I nonetheless do not plan on shopping for Micron inventory. I have to do some extra analysis.

I would prefer to know extra about long-term reminiscence calls for. Additionally they need to know extra concerning the firm’s aggressive benefit.