Micron (MU) stock has been on the rise, and there are signs that the stock could continue this trend in calendar 2017. This trend has made most Wall Street analysts bullish on Micron. Of the 30 analysts monitoring Micron stock, 87% have a “buy” recommendation, and 13% have a “hold” recommendation.
As the second-ranked performer, NVIDIA (NVDA) has mixed recommendations. Of the 34 analysts monitoring the stock, 50% have a “buy” recommendation, and 38% have a “hold” recommendation, and 12% have a “sell” recommendation.
For Advanced Micro Devices (AMD), analysts are more skewed toward a “hold” recommendation, as the stock price is overvalued based on its fundamentals.
Analysts bullish on Micron
FBN Securities analyst Shebly Seyrafi has set a $45 price target for Micron, as he believes that increasing consolidation in the memory market has moderated the peak-to-trough declines. He referred to Micron’s graph of memory trend, which showed that the peak-to-trough decline fell from ~57% in the mid-1990s to just ~18% in 2011–2012.
Seyrafi noted that the largest DRAM (dynamic random access memory) revenue declines in the past ten years occurred in 2008 and 2011 when DRAM revenues fell 24% and 25%, respectively. However, DRAM revenues fell just 10% in 2016.
Supporting Seyrafi’s comments were KeyBanc Capital and Wells Fargo, which are bullish on Micron because they are optimistic about DRAM pricing. Wells Fargo referred to data from the Semiconductor Industry Association that showed an 85% increase in DRAM sales and a 25% increase in overall semiconductor sales in August 2017. DRAM sales have been growing at this pace since June 2017.
Goldman Sachs analyst Mark Delaney has raised his rating on Micron from “hold” to “buy” and kept a price target of $40. In a recent research note, he stated that the memory market is expected to be in the middle to later stages of the uptrend and could turn around anytime. However, industry discussion indicates that the uptrend could continue in calendar 4Q17.
Industry views suggest that DRAM prices—server and mobile DRAM—in particular, would increase in 4Q17. However, NAND prices could remain flat or increase sequentially in 4Q17. Looking at the tight supply conditions in the DRAM market, Delaney expects Micron to report better-than-expected earnings in fiscal 1Q18.[1, fiscal 1Q18 ending November 2017]
In the final part of this series, we’ll look at Micron’s stock valuation from the perspective of its fundamental. We’ll determine whether how its indicators could affect the cyclical stock.