Publicly-traded semiconductor chip company Micron Technology (MU) has only marginally increased its revenue over the last few years. Nonetheless, its stock has maintained its grasp of the headlines as the chip shortage continues to pervade numerous tech supply chains, from smartphones to automobiles.
Analysts have downgraded Micron stock in a move that questions the likely success of upcoming earnings. Here’s why and where MU stock may be headed moving forward.
Barclays downgrades Micron stock.
Barclays analysts downgraded Micron’s target price to $75 per share from a previous estimate of $105 per share.
MU stock is trading at $58.45 per share as of mid-afternoon on Tuesday, June 28. The updated target price is an improvement, but a slimmer one at that.
Why is there pressure on Micron?
Analysts label Micron as "overweight" and say about the downgrade, “We think this is a much better company than it was last cycle but struggle with how the name works over the coming 6 months with additional end markets turning over. Long term, we do think the stock can work again but we see no catalyst near term.”
MU stock forecast
Micron’s fiscal third quarter of 2022 earnings are on the horizon, and the estimates are in. MU is poised to hit an EPS of $2.45, up more than 30 percent YoY. Analysts also expect revenue to increase by 16.68 percent YoY. Despite these projected improvements, MU may report slower growth than anticipated, which could impact the stock’s near-term potential.
Micron stock is down marginally on June 28 in response to quelled expectations. Looking beyond the 38.74 percent downturn YTD, the stock is up more than 20 percent in the last two years, and it has nearly doubled in the last five years.
Analysts predict an uptick in MU's stock value over the next 12 months, meaning the downgrade may reflect a shorter-term prediction more than a longer-term one. Most analysts still call Micron a "buy" based on this outlook, with estimates as high as 181.3 percent in the green over the next 12 months. That would put the current stock price closer to $165 per share. The median prediction sits closer to 65 percent in the green, or $95 per share, which may be more reasonable given the ongoing semiconductor chip shortage and macroeconomic trends.
Ultimately, MU stock may be a secure bet for investors interested in a long-term strategy inclusive of tech. However, we may not have met the bottom yet, so consider holding off or leaving capital for averaging down later if you do invest.
MU stock has some competitors.
If you aren't certain about Micron or want to diversify your stake in the subsector, consider these Micron competitors.
Micron’s biggest competitors include Intel Corp. (INTC), Western Digital Corp. (WDC), and Seagate Technology (STX). Intel is down for the year but analysts note a median forecast estimate of an 29.8 percent improvement in the next year. Even pessimistic analysts agree Western Digital will thrive, with estimates ranging from 5.8 percent to 90.5 percent in the green. Seagate could hit a median boost of 36.8 percent in the same period.