Micron Could Break Out to New Highs in 2022
Micron Technology Inc. (MU) has ended a 6-month correction and broken out above a series of lower highs, raising odds the memory giant will test April’s 21-year high in the mid-90s. The all-time high, posted during the Internet bubble in 2000, resides just 54 cents above that price level, indicating the stock could finally join the rest of the semiconductor universe in a generational uptrend that offers substantial upside.
Memory Sales Exceeding Estimates
Memory demand is improving across personal computers, servers, and handheld devices, contrary to broad expectations for slumping growth into 2022. DRAM pricing remains an issue but robust sales could easily overcome that headwind, allowing Micron to exceed conservative revenue estimates still in play at most Wall Street research firms. An upturn in pricing could be the ‘icing on the cake’ next year, underpinning exceptionally strong annual performance.
Cowen analyst Karl Ackerman raised his firm’s price target from $80 to $99 on Monday morning, noting “We think MU should outperform broader semis in C22 based on 1) a notable reduction in customer DRAM inventory levels across server, PC and mobile markets; 2) more rational DRAM wafer capacity growth in C22 than C21; and 3) strong leverage to growing DRAM content in AI/ML servers, ADAS and EV vehicles, and 5G Android.
Wall Street and Technical Outlook
Wall Street consensus has improved modestly in the last three months, now standing at a ‘Moderate Buy’ rating based upon 16 ‘Buy’, 5 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $58 to a Street-high $165 while the stock is set to open Tuesday’s session about $14 below the median $98 target. Supply disruptions have impacted these targets, suggesting analysts haven’t spent enough time evaluating the improving sales outlook.
Micron Technology rallied above 2018 resistance at 65 in November 2020 and stalled in April 2021 less than a buck below 2000’s all-time high at 97.50. The subsequent downturn persisted through the second and third quarters, dropping the stock to a 10-month low in October. It added 23 points into early December and is now consolidating above 50- and 200-day moving average support, setting the stage for a final thrust up to long term resistance near triple digits.
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Disclosure: the author held no positions in aforementioned securities at the time of publication.