The best tech stock to buy in September

This semiconductor stock, not named NVIDIA, has huge upside and could soar in September

While overvalued tech stocks like NVIDIA (NASDAQ:NVDA) have taken a beating so far in September, there is one in particular, Micron Technology (NASDAQ:MU) that has the potential to break out this month.

Micron stock is not overvalued, yet it has seen rapid revenue growth, and it has a couple of catalysts this month that could send its price higher.

Making memory chips

Micron is a chipmaker, but it does not compete directly with NVIDIA, Intel, AMD or the other big names in the semiconductor space.

That’s because Micron plays in a different arena, making memory and storage chips for personal computers, smartphones, as well as high performance computing data centers.

In this space, it is one of the leading players, with the third largest market share in dynamic random active memory (DRAM) chips behind Samsung and South Korean firm SK Hynix.

AI demand fueling revenue growth

Micron’s biggest growth area recently has been with its high bandwidth memory (HBM) chips, particularly its HBM3E chips, which have among the highest storage capacity to store complex generative AI data. They also consume less power than similar chips offered by many of its competitors, which lowers costs for its clients.

Micron’s revenue growth has been driven by data centers, where large companies and organizations store and process massive amounts of data. In fact, in the last quarter, Micron had record data center revenue, with AI demand driving most of the revenue.

Overall, in the fiscal third quarter ended May 30, Micron generated $6.8 billion in revenue, up 82% year over year and 17% from the previous quarter. Net income climbed to $332 million, from a net loss of $1.9 billion in the same quarter a year ago.

It was down from net income of $793 million in the previous quarter, but that quarter incorporated a sizable tax benefit. When calculated on an adjusted basis, Micron had adjusted net income of $702 million last quarter, compared to $476 million the previous quarter.

“Robust AI demand and strong execution enabled Micron to drive 17% sequential revenue growth, exceeding our guidance range in fiscal Q3,” Sanjay Mehrotra, president and CEO of Micron, said. “We are gaining share in high-margin products like High Bandwidth Memory (HBM), and our data center SSD revenue hit a record high, demonstrating the strength of our AI product portfolio across DRAM and NAND.”

Why September could be big

A major reason why Micron is such an attractive stock is obviously its significant revenue and market share growth in a booming industry. But a bigger reason right now is its valuation. Unlike other fast growing tech stocks, Micron is not overvalued. In fact, it has largely flown under the radar, and with a price-to-earnings ratio of just 10, it is wildly undervalued.

It also has two major catalysts upcoming in September that could drive the price higher. The first is the Federal Reserve’s FOMC meeting on September 10 and 11. It is widely anticipated that the Fed will lower interest rates for the first time since the pandemic, and that should jolt many stocks, particularly undervalued tech stocks, as it will reduce the cost of borrowing, thus potentially boosting profits.

The second, and more specific, catalyst is Micron’s fiscal fourth quarter earnings report, due to come out on September 26.

Analysts see huge upside

In its fourth quarter, Micron has guided for $7.6 billion in revenue, up 12% from the previous quarter, and earnings per share of 61 cents, double what it was last quarter. Further, the outlook for its gross profit margin is 33.5%, which would be up from 26.9% last quarter. If Micron meets and exceeds these estimates, it could send the stock price shooting higher.

Wall Street analysts are indeed bullish on Micron, as the median price target among 41 analysts is $165 per share. That would be 85% higher than its current share price of $90 per share. As of September 5, Micron stock was up 9% year-to-date.

If investors are seeking an undervalued tech stock that could potentially pop in September — and beyond — Micron stock might be worth a look.