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Can Micron Stock Continue to Outperform the Market in 2017?

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Dec. 4 2020, Updated 10:53 a.m. ET

Micron stock outperforms the market

In the previous part of this series, we saw that some analysts are bullish on Micron Technology (MU) amid a favorable pricing environment in the memory market. Micron stock is directly proportional to DRAM (dynamic random access memory) prices since Micron earns more than 60.0% of its revenue from DRAM.

Micron stock has risen 154.0% in the last 12 months, hitting a new 52-week high of $32.93 in June 2017. The stock outperformed the S&P 500 Index (SPY), which rose ~18.0% during the same time period. The stock also outperformed its peers Western Digital (WDC) and Intel (INTC), whose stocks rose 86.0% and 11.0%, respectively. Overall, Micron outperformed the market and its peers by a huge margin since DRAM demand and prices have risen over the last two quarters.

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Micron’s stock movement in 2017

Since the start of 2017, Micron stock has risen 38.0%, whereas Western Digital stock has risen only 28.0%. Intel stock has fallen 2.4% year-to-date as the company’s transition slows down its revenue growth for fiscal 2017.

The significant rise in Micron stock raised concerns among investors about whether the stock was a good buy at $32. These concerns saw some correction in the price of the stock, and it fell 8.0% between June 8 and June 16, 2017. The bullish analysts consider that a buying opportunity since they expect a strong seasonal demand and tight supply to raise memory prices further throughout 2017, thereby raising Micron stock.

Micron stock gain is slower than earnings growth 

Micron stock has risen 18.0% since March 23, 2017, when it released its fiscal 2Q17 earnings. The company expects its revenue to rise 16.0% and operating income to rise 53.0% on a sequential basis in fiscal 3Q17.

Micron stock is rising more slowly than its earnings since investors are hesitant due to cyclicality. That indicates that there’s ample room for share price appreciation in the coming quarters. If the company reports better-than-expected fiscal 3Q17 earnings and guidance, the fear of cyclicality could fade, and the stock could reach or even exceed its consensus price target of $38.

In the next part of this series, we’ll look at institutional investors’ sentiment for Micron stock.

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