MU Stock: Could This Be a Turnaround for Micron Technology, Inc.?

MU StockThis Could Be Huge for Micron Stock

Micron Technology, Inc. (NASDAQ:MU) stock has been the unloved child in the semiconductor industry. That shouldn’t really come as a surprise. These days, the PC industry is declining. With its main products being DRAM (dynamic random-access memory) and NAND memory chips for PCs, Micron stock has plunged pretty badly.

However, note that memory chips are not just used in PCs. Smartphones, tablets, and almost every kind of “smart” electronic device needs some form of memory. Also, the demand for higher memory capacity has been going strong because of the new gadgets, such as virtual reality headsets, that are coming to market.

So, before we get into anything further, note that Micron’s memory business is far from over.

However, that’s not really the point of this story. Most recently, Micron has stepped up its game in another segment—storage. And that’s where the real story is.

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I’m looking at Micron’s solid-state drive (SSD) business. SSDs are more stable compared to traditional hard disk drives (HDDs). At the same time, they are also more compact and more energy-efficient.

In its most recent fiscal quarter, operating income from Micron’s client and consumer SSD segment surged 13% sequentially. (Source: “Micron FQ2-2016 Earnings Call Presentation Slides,” Micron Technology, Inc., March 30, 2016.)

This time, though, it’s Micron’s enterprise SSD segment that’s making the headlines.

Last week, the company announced a set of solutions for open source and software-defined data centers named “Micron Accelerated Solutions.” Moreover, the company is partnering with VMware, Supermicro, and Nexenta to provide all-flash storage solutions to customers. (Source: “Micron Simplifies Path to Next-Generation All-Flash Data Center with Introduction of Micron Accelerated Solutions,” Micron Technology, Inc., April 12, 2016.)

On that same day, the company also opened the Micron Storage Solutions Center (MSSC) in Austin, Texas. MSSC is also going to be where the company conducts research in storage software and the developing ground for Micron Accelerated Solutions.

And that’s not all. Micron has announced two upcoming products, too.

The first one is the “Micron 9100” SSD, which uses an NVMe interface and boasts super-fast performance speeds. The company said that it could be up to 10-times faster compared to single data center SATA SSDs. (Source: “Micron Accelerates Data Center Storage with New NVMe PCIe SSD Portfolio,” Micron Technology, Inc., April 12, 2016.)

The second new product is the “Micron 7100.” While being fast, the product boasts increased energy efficiency. Micron claims that the 7100 “uses half as many watts as a standard high-performance NVMe drive but provides low latencies unachievable by SATA SSDs.” (Source: Ibid.)

The products look pretty good on paper and the new solutions center surely sounds like the birthplace of new technology. But what does all that mean for MU stock?

Well, if you ask Cowen and Company analyst Tim Arcuri, the answer is that moving into enterprise storage would give quite a bit of upside to Micron stock.

Arcuri reiterated his “Outperform” rating on Micron stock and gave it a price target of $13.00. At today’s share price, that implies a more than 20% upside in MU stock. (Source: “Micron: Cowen Likes Their Technological Edge in Cloud Era,” Barron’s, April 12, 2016.)

Arcuri pointed out that Micron is the “only producer for all mainstream flavors of solid state memory.” (Source: Ibid.) And as the company expands its presence in the business, Arcuri states, “we are bullish.”

The Bottom Line on MU Stock

Of course, at the end of the day, good products and services need to translate into sales and profits. If the company can successfully implement its strategies in different segments of the SSD business, a $13.00 price tag for MU stock might not be that far away.