Micron Technology stock offers an attractive buying opportunity as the semiconductor industry recovers, says Citi Research.
On Monday, analyst Christopher Danely reiterated his “Top Pick” Buy rating for
Micron
(ticker: MU), a leading seller of DRAM memory chips, and reaffirmed his $85 price target, which implies about 22% of upside. DRAM stands for dynamic random-access memory, commonly used in desktop computers, smartphones, and servers.
After meeting with clients last week, “we had a difficult time getting traction on our Buy Micron call. Investors believe that Micron’s valuation already incorporates the upturn in DRAM,” he wrote. “We disagree.”
Micron stock is up 0.8% in Monday trading to $69.74.
The analyst noted memory pricing has started to recover as the major chip makers have cut production. He now predicts memory-chip prices will rise 10% quarter over quarter in the fourth quarter, and rally 32% year-over-year in 2024.
The improving trends should spark a rally in Micron’s stock price as the company’s earnings improve, according to Danely.
“We believe the negative profitability will disappear within a few quarters as inventory goes down, utilization rates increase, and DRAM prices increase, driving Micron back to solid profitability,” he wrote.
Micron stock has risen about 40% this year, roughly in line with the 39% rise in the
iShares Semiconductor
exchange-traded fund (SOXX). The ETF tracks the performance of the ICE Semiconductor Index, of which Micron stock is a component.
Write to Tae Kim at [email protected]
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