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Micron share price: Will it go even higher?

With DRAM demand expected to increase, will the growth momentum for Micron Technology share price continue?

US semiconductor firm Micron Technology, Inc.'s recent stock surge has prompted Wall Street to revise its price targets for the company.

Investment brokers polled by CNN Business have offered a 12-month median price outlook of US$65 per share, which represents a 13.14% increase from the current price of US$57.45.

As of 14 January, 23 of 34 traders surveyed also reiterated a ‘buy’ rating for the stock, while one gave it an ‘outperform’, six said to ‘hold’, two to ‘underperform’, and another two on ‘sell’.

What caused the price surge?

At the Consumer Electronics Show (CES) on Tuesday (07 January), Micron Technology saw share price skyrocket 8.8% to close at US$58.27 per share.

The rally was said to have been sparked off in part by a prolific rating upgrade from Cowen analyst Kerl Ackerman, who had raised his price target from US$50 to US$70 per share on Micron equity ahead of the event.

Ackerman had based his prediction on an expected revival of the DRAM (dynamic random-access memory) market in the latter half of 2020, as 5G smartphone technology requiring higher memory begins to be deployed. Micron is a major DRAM producer.

‘DRAM fundamentals may improve earlier than expected, supporting Micron’s improved cost position vs. peers,’ Ackerman wrote in a note. ‘Micron’s NAND cost headwind to 128L is known, but our analysis shows overall NAND costs are better than feared and NAND should become profitable again as new smartphone launches tighten supply.’

Micron stocks are still relatively bullish one week on, with share price trading above US$57.

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Expected pay-offs after Q3 FY2020

Micron CEO Sanjay Mehrota’s latest guidance also reflected this upbeat sentiment. During the company’s conference call in December regarding Q1 earnings, he said the ‘fiscal second quarter will mark the cyclical bottom for our financial performance’, with improvements expected from Q3 and the second half of calendar 2020.

This is partly due to a growing pipeline of high-value solutions, including a new 1TB remote centralised storage solution built specifically for autonomous vehicles in collaboration with Israeli semiconductor firm Valens.

Launched at this year’s CES, the solution is based on Micron’s latest automotive-compliant ball grid array solid-state drive and Valens’ advanced automotive connectivity technology.

High-value solutions accounted for approximately 50% of the company’s total NAND bits sales. Mehrota expects this figure to grow to over two-thirds of all NAND bits sold for fiscal 2020.

‘We remain on track to drive 80% of our NAND bits into high-value solutions in FY2021,’ Mehrota added. ‘This mix improvement is an important tailwind for us as it improves our profitability and reduces the volatility in our margin.’

Micron’s total outstanding shares currently give a market capitalisation of US$64.67 billion. Share value is up 6.82% this year.

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This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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