Technology

Why This Analyst Believes Micron Can Keep Up This Explosive Growth

Chris Lange

Published: March 17, 2018 10:35 am

Last Updated: January 12, 2020 2:20 am

Micron Technology Inc. (NASDAQ: MU) continues to be the star of the chip stocks, with its shares more than doubling in the past year alone. And to add more fuel to the fire, one analyst came out last week with the most bullish call in the history of the stock. Investors went into a frenzy upon hearing the call, and the stock ultimately ended the week about 11% higher.

As we have said before, the markets have been subject to a severe amount of volatility recently. And in the past, the tech sector has been the rising tide that the markets tend to recover on. If that is the case, it’s safe to say that Micron is a tsunami.

Nomura Instinet’s Romit Shah reiterated a Buy rating for Micron and raised the price target to $100 from $55. Shah believes that this stock is on the verge of another major breakout.

Overall, Nomura Instinet sees DRAM pricing resuming an upward trend in the second quarter. This directly contradicts what Wall Street is calling for, which is about a 5% to 6% decline over the next four quarters.

Shah detailed in the report that memory prices have dropped about 3% so far in 2018, which fares well compared with the 10% to 20% seasonal decline that the market has seen in the past few years. Another prediction from Shah is that prices will rise by roughly 10% over the next six months.

At the same time, the firm believes that a first-time dividend and share buyback are coming in May, as well as continued margin expansion in NAND and the potential for M&A. All this combined potentially provides for a very bright future for this stock.

Earnings estimates for the chipmaker were also raised. The firm expects to see per-share earnings for the 2019 fiscal year (ending in August) to be $12.22, up from $11.78. The consensus estimate is stuck at $8.73 per share.

As mentioned earlier, Micron has been one of the hottest stocks over the past year. The stock is up about 133% in the past 52 weeks, with about 47% of this coming in 2018 alone. This is vastly outpacing the tech sector, which is up only 30% in the past year and 9% year to date.

Shares of Micron closed Friday at $60.58, with a consensus analyst price target of $62.75 and a 52-week trading range of $25.43 to $63.42.