Fears of a recession, fuelled by rising oil prices, recently pushed the Nasdaq Composite into correction territory, dropping over 10% from its peak. However, history suggests corrections often present lucrative buying opportunities. Over the past 15 years, the Nasdaq has bounced back impressively, averaging a 22% return in the year following its initial correction close. Investors looking to capitalise on this dip should consider Micron Technology and AppLovin, two companies Wall Street analysts believe are significantly undervalued.
While some forecasts are optimistic, the consensus among analysts is that Micron and AppLovin are poised for substantial growth.
Micron specialises in memory and storage solutions vital for personal computers, mobile devices, data centres, and automotive systems. Their expertise lies in DRAM memory products, including high-bandwidth memory (HBM), and NAND flash memory products, all crucial components in powering artificial intelligence (AI) systems.
The surge in memory chip prices is primarily due to a critical supply shortage. Following the post-pandemic supply glut, manufacturers hesitated to expand production capacity, leaving them unprepared for the explosive demand driven by the AI infrastructure buildout. Micron, a major player in DRAM, HBM, and NAND supply, has benefited significantly from this situation.
Last quarter, Micron’s revenue nearly tripled, driven by robust growth in the data centre segment. CEO Sanjay Mehrotra stated, "Micron set new records across revenue, gross margin, EPS, and free cash flow in fiscal Q2, driven by a strong demand environment, tight industry supply, and our strong execution. We expect significant records again in fiscal Q3."
Despite this positive momentum, Micron’s stock trades 23% below its high. The memory chip industry is known for its cyclical nature, fluctuating between supply shortages and gluts. While investors are understandably cautious about the sustainability of the current supply shortage, this excessive caution may have created an attractive entry point for investors.
