Micron Technology, Inc: Why MU Stock is Going Crazy

MU StockIf Micron Technology Stock Does This, It Will Soar

As the volatility in the semiconductor industry continues, Micron Technology, Inc (NASDAQ:MU) stock has been gaining ground gradually on the back of improving market conditions.

Expectations are high, as can be gauged from the movement in Micron Technology stock. The MU stock price had touched a low of $9.56 in May of this year, and it closed at $17.54 on Thursday. So why has the sentiment turned positive for Micron stock?

The demand for dynamic random access memory (DRAM) chips—Micron’s main source of revenue—is going up, along with the improvement in DRAM prices. Management is also optimistic about meeting the company’s cost-reduction targets. This leads to the enhancement in profitability, which has been a negative factor for MU stock so far.

Nomura has just released its report that maintains a “buy” rating on MU stock with a price target of $23.00. The analyst’s note advised investors to buy on dips. (Source: “Micron (MU) Stock Higher, Nomura: Buy on Weakness,” TheStreet, September 29, 2016.)

The majority of analysts covering Micron stock are optimistic about the company’s prospects and maintain a “buy” or a “hold” rating. The strengths of Micron Technology include a good financial position with reasonable debt levels.

The major weaknesses of Micron Technology, Inc is its declining return on equity (ROE) and weak growth in earnings per share (EPS). However, recent improvements in market conditions bodes well for the company, and has turned the sentiment positive for Micron stock.

Micron supplies DRAM memory chips for computers and NAND flash memory chips for smartphones, digital cameras, tablets, and many other electronic devices that we use every day. The recent decline in the smartphone segment had raised worries, but Micron Technology, Inc is not behind in exploring new growth areas for its flash memory products.

In May of this year, NVIDIA Corporation (NASDAQ:NVDA) launched its new “GeForce GTX10” series graphic cards with Micron “GDDR5X.” The “GTX 1080” is one of the most advanced gaming cards ever created, and the first card in the world to use Micron’s “GDDR5X” memory. (Source: NVIDIA Launches GTX1080 with Micron GDDR5X, Micron Technology Inc, May 10, 2016.)

Micron Technology, Inc’s successful collaboration with Intel Corporation (NASDAQ:INTC) in the development of 3D “XPoint” memory is another winning story for MU stock. Micron’s 3D XPoint is a faster alternative to NAND memory.

Moreover, the good demand that has been projected for the “iPhone 7” by Apple Inc. (NASDAQ:AAPL) bodes well for the company and MU stock, as Micron is an important supplier to Apple.

Micron is active in introducing new technologies, and that is good news for MU stock and its investors. With its great portfolio of memory products like DRAM, NAND, and NOR that power the electronic devices of today, Micron is likely to remain a dominant player as reports of Qualcomm, Inc (NASDAQ:QCOM) being set to acquire NXP Semiconductors NV (NASDAQ:NXPI) keep the industry in the limelight in the coming days.

As investors look forward to the fourth-quarter FY16 earnings results on Tuesday, Micron’s management has to not only meet the consensus estimates, but also show how its cost-reduction strategy is working out. If management can lay out its future growth plans in the diverse segments of automotive, virtual reality (VR), and wearable devices, it would send Micron stock soaring high.