Memory-chip maker Micron Technology (MU) has seen its shares punished by a downturn in the chip cycle. MU stock has been buoyed recently by hopes of a turnaround soon in the sector. But is Micron stock a buy right now?

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Memory-chip inventories began rising last fall as sales of smartphones, personal computers and other gear slowed. Inventories are coming down, but the sector isn’t out of the woods yet.

Boise, Idaho-based Micron makes two main types of memory chips: DRAM and Nand. Dynamic random-access memory, or DRAM, accounted for 63% of company revenue in the fiscal fourth quarter ended Aug. 29. Nand flash memory accounted for 31% of Micron’s revenue during the period.

DRAM chips act as the main memory in PCs, smartphones and other devices, working closely with central processing units. Nand flash provides longer-term data storage.

In DRAM chips, MU stock competes with South Korea’s Samsung Electronics and SK Hynix. In Nand flash chips, Micron competes with Samsung, Toshiba, Western Digital (WDC), SK Hynix and Intel (INTC).

MU Stock Fundamental Analysis

On Sept. 26, Micron reported fiscal fourth-quarter sales and earnings that beat Wall Street’s expectations. However, its guidance was mixed.

It earned an adjusted 56 cents a share on sales of $4.87 billion in its fiscal fourth quarter. Analysts expected Micron earnings of 48 cents a share on sales of $4.52 billion. On a year-over-year basis, its earnings fell 84% while sales dropped 42%. It was the third quarter in a row of declines in earnings and sales for Micron.

Analysts see declines continuing for Micron for at least the next two quarters, according to Zacks Investment Research.

For the current quarter, Micron expects to earn an adjusted 46 cents a share on sales of $5 billion. That’s based on the midpoint of its guidance. Analysts had been modeling Micron earnings of 52 cents a share on sales of $4.7 billion in the company’s fiscal first quarter, Zacks said. In the year-earlier period, Micron earned $2.97 a share on sales of $7.91 billion.

Micron Stock Technical Analysis

On July 10, Micron stock broke out of a first-stage, cup-with-handle base at a buy point of 41.81. MU stock climbed as high as 51.39 on Sept. 11. It stayed in the profit-taking zone for several days before tumbling below its 50-day moving average line on Sept. 27. A breach of that key support level is a warning sign.

It has since formed a second-stage, cup-with-handle base with a buy point of 50. But the handle this week dropped below the stock’s 50-day moving average line. MU stock ended the regular session Wednesday at 46.30.

MU stock has an IBD Relative Strength Rating of 83, meaning it has outperformed 83% of stocks over the past 12 months. The best growth stocks typically have RS Ratings of at least 80.

Is MU Stock A Buy Right Now?

Micron stock is not a buy right now, but it soon could be. It needs to break out of a proper base in the right market conditions.

The market is currently in a confirmed uptrend, according to IBD’s Big Picture column. But investors should be cautious when it comes to MU stock. Check back here for updates on whether Micron is a buy.

Micron ranks first out of 10 stocks in IBD’s Computer-Data Storage industry group.

Micron stock has a decent IBD Composite Rating of 71 out of a possible 99, according to the IBD Stock Checkup tool. But the best growth stocks have a Composite Rating of 90 or better.

To find the best stocks to buy or watch, check out IBD Stock Lists and other IBD content.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor companies.

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