The share of Micron Technology Inc. received price increases from more than half of the analysts following it Friday and lost its holdout sell rating amid strong growth expected in 2021.
Late Thursday, Micron MU,
confirmed that the memory chip market is reversing reporting of results and outlook that surpassed Wall Street’s estimates, adding that the outlook would have been stronger had there not been shortages of non-memory chips hampering production in the computer industry .
Micron lost its last ‘sell’ rating when Morningstar analyst Abhinav Davuluri raised his rating on the stock from two stars to three stars, or a hold rating, and raised his price target from $ 50 to $ 65.
“We believe Micron is well positioned to benefit from double digit revenue growth in fiscal 2021, driven by more memory content related to AI, cloud, 5G and new game consoles,” said Davuluri.
Of the 35 analysts covering Micron, 29 have a buy or overweight rating for the stock and six have a hold rating. Of those 22 analysts increased their stock price targets, resulting in an average price target of $ 97.23, compared to $ 85.50 before the report, according to data from FactSet.
Evercore ISI analyst CJ Muse, who has an outperform rating and has raised his price target from $ 90 to $ 105, indicated that Micron is definitely at the bottom of its cycle and can only move up from here.
“Let’s keep it simple – DRAM has hit rock bottom,” said Muse. “And the outlook is bright, supported by 2 years of under-delivery of the offering coupled with growth drivers led by 5G, AI, Cloud, and a recovery in Automotive / Industrial that should support supply constraints over the course of 2021 and possibly beyond. “
Micron specializes in DRAM and NAND memory chips. DRAM, or dynamic random access memory, is the type of memory commonly used in PCs and servers and accounted for 70% of Micron’s $ 5.77 billion in fiscal first quarter revenue. NAND chips are the flash memory chips used in USB drives and smaller devices such as digital cameras.
Citi Research analyst Christopher Danley, who has a buy rating and raised his price target from $ 110 to $ 113, said the recovery in DRAM “should take at least a year.”
“After a false start in 2020, we expect DRAM pricing to continue its upward trajectory from 1Q21, given the largest supply / demand imbalance since 2017,” said Danley. Last year, Micron had also listed a low point in the memory chip market, which had suffered from years of supply.
“We forecast DRAM supply to grow + 16.8% year-on-year in 2021, below DRAM demand growth of + 20.1% year-on-year,” said Danley.
Cowen analyst Karl Ackerman, who has an outperform rating and raised his price target from $ 80 to $ 90, looked at past performance boosted by an accounting change and a lack of stock buybacks during the quarter.
“A favorable accounting change in an upward price environment and the lack of buybacks could be bottlenecks for bears,” Ackerman said. “However, MU enters F21 with arguably the best product portfolio in the industry that should enable it to capitalize on increasing demand.”
Micron shares have staggered between slight gains and losses during Friday trading. On the other hand, the stock is up more than 5% this week as analysts pushed their ratings for the stock higher on earnings. Shares closed at $ 79.11 on Thursday, their high since August 31, 2000, when they closed at $ 81.75.
Over the past three months, Micron’s stock is up 60%, compared to a 25% rise on the PHLX Semiconductor Index SOX,
an 11% increase due to the S&P 500 index SPX,
and a 15% gain from the Nasdaq Composite Index COMP,
Compare that to the past 12 months when Micron posted a 39% gain and the SOX index rose 58%.