Micron: Growing DRAM Demand Merits a Price Target Boost
Micron’s (MU) upward momentum is displaying no indicators of fatigue. After struggling via 2020’s first three quarters, affected by an antagonistic microenvironment and a lack of demand for its reminiscence merchandise, the chip large is firing on all cylinders.
The semiconductor trade is understood to be cyclical in nature, and the pendulum has now swung sharply in Micron’s favor. As clients’ demand for DRAM has elevated, so have Investors’ urge for food to personal Micron shares. Since 4Q20, the inventory is up 90%.
However, the noises coming from the semiconductor trade counsel to Deutsche Bank analyst Sidney Ho, that the necessity for DRAM is about to additional speed up.
“With demand across applications appearing more robust that we previously expected, we believe DRAM will remain undersupplied for the next few quarters even with the strong DRAM capex increase expected this year,” 5-star analyst famous.
Based on the belief of a increased ASP (common promoting worth) for DRAM, Ho raised his EPS forecast for F2Q to $0.85, which is above the excessive finish of Micron’s $0.75 +/- $0.07 steerage vary.
Even although nearly all of Micron’s enterprise relies on contracts which often lag spot costs, contemplating the spot market’s energy, Ho thinks there could possibly be further upside to his revised estimates.
Industry checks at PC/server/ storage OEMs additionally counsel DRAM pricing will proceed to extend till C3Q21 on the earliest. This deserves a increase to CY21 estimates; Ho now expects EPS for FY21 to hit $4.44, up from the prior $3.78.
Furthermore, Micron’s NAND phase is also due a increase. “We believe there could be upside from the NAND business as recent data points are starting to get more positive,” Ho famous.
Although Ho warns that the trade’s cyclical nature will sooner or later inevitably imply the demand/provide paradigm will shift once more, Ho expects Micron’s valuation to proceed its upward trajectory “until there are signs that the upcycle is coming to an end.”
Accordingly, Ho raised his worth goal from $90 to $110, indicating further upside of 24%. Ho’s score stays a Buy. (To watch Ho’s observe report, click here)
Micron has loads of different supporters on the Street. The analyst consensus charges the inventory a Strong Buy, primarily based on 23 Buys vs. 2 Holds. At $112.92, the typical worth goal implies upside of 27% within the coming months. (See Micron stock analysis on TipRanks)
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Disclaimer: The opinions expressed on this article are solely these of the featured analyst. The content material is meant for use for informational functions solely. It is essential to do your individual evaluation earlier than making any funding.
