Why Micron Stock May Be a Good Bet in 2022, Outperform Broader Semis

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Published: Dec 20, 2021, 14:40 UTC

“We think Micron Technology (MU) should outperform broader semis in 2022,” noted Cowen’s Ackerman.

“We think Micron Technology (MU) should outperform broader semis in 2022 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 2022 than 2021; and 3) strong leverage to growing DRAM content in AI/ML servers, ADAS and EV vehicles, and 5G Android smartphones. We are increasing our price target from $80 to $99,” noted Karl Ackerman, equity analyst at Cowen.

Later today, the world’s leading semiconductor manufacturer is expected to report its fiscal first-quarter earnings of $2.01 per share, representing year-over-year growth of more than 155% from $0.78 per share seen in the same quarter a year ago.

The Boise Idaho-based semiconductor company is expected to post revenue growth of over 30% to around $7.7 billion from a year earlier. In the last two years, the company has always topped expectations on earnings per share.

However, for the fiscal Q1 guidance, the world’s leading semiconductor manufacturer forecast revenue of $7.65 billion, plus or minus $200 million, missing the Wall Street consensus of $8.57 billion. In addition, the company projected adjusted earnings per share of $2.10, plus or minus 10 cents, missing expectations of $2.33.

The company, which provides components for Apple, has been affected by short-term supply issues in its own supply chain. Power outages in China have impacted the supply chains for other tech companies as well.

“Micron’s revenues are much larger than that of Texas Instruments Incorporated (TI), but the latter has a higher EBIT margin and a better cash cushion. However, our comparison of the post-Covid recovery above, shows that Micron has been performing better than TI lately. Given Micron’s P/S ratio of around 3x, compared to TI’s 10x, we believe that this gap could close. As such, we believe that Micron stock is currently a much better bet compared to Texas Instruments stock,” said analysts at TREFIS in its December 16 note.

Micron Technology stock soared over 10% so far this year. It traded 1.27% lower at 81.95 in pre-market trading on Monday.

Analyst Comments

“While the underlying demand trends are strong and producer inventory levels are low heading into a period of seasonal strength, there are some signs of inventory adjustments short term after customers-built inventory,” noted Joseph Moore, equity analyst at Morgan Stanley.

“We see demand growth on the back of seasonality, memory elasticity/higher content per unit, and low customer inventories, and very slow supply growth in DRAM given declines in capex. We continue to believe that memory stocks have a relatively well-defined earnings cycle, though highs and lows are likely to be better than they have been historically.”

Micron Technology Stock Price Forecast

Twenty-two analysts who offered stock ratings for Micron Technology in the last three months forecast the average price in 12 months of $99.18 with a high forecast of $165.00 and a low forecast of $58.00.

The average price target represents a 19.49% change from the last price of $83.00. Of those 22 analysts, 16 rated “Buy”, five rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $75 with a high of $120 under a bull scenario and $40 under the worst-case scenario. The firm gave an “Equal-weight” rating on the semiconductor’s stock.

Several other analysts have also updated their stock outlook. UBS raised the target price to $99 from $90. Cowen and company lifted the price objective to $99 from $80. Mizuho upped the price target to $95 from $75.

Technical analysis suggests it is good to buy now as 100-day Moving Average and 20-200-day MACD Oscillator signals a buying opportunity.

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