Micron Technology, Inc. (NASDAQ:MU) looks to be in an excellent position, and presents a promising investment opportunity. MU stock is up over 40% since the start of this year.
On Wednesday, investment firm Mizuho Securities reiterated a “Buy” rating for Micron and gave a $38.00 price target after an SEC filing revealed that Micron CFO had bought the company’s shares. Earlier this month, Citigroup analyst, Christopher Danely said in a report that Micron Technology, Inc. (NASDAQ:MU) profited from a strong DRAM pricing in July, and the company is expected to enjoy high DRAM prices for months to come. Danely has a “Buy” rating for the semiconductor stock.
Despite of the strength of the company’s fundamentals and finances, there is a fear among investors that Micron might get hit due to an impending cyclical downtrend in the semiconductor market. But these concerns are unfounded.
The global semiconductor market is expected to grow by CAGR of 6.7% through 2025. The total market worth in 2025 will reach about a whopping $655 billion. Micron being the market leader in 3D NAND is expected to gain heavily from this upward growth trend. Micron will also take huge gains from the lucrative IoT semiconductor market and DRAM market growth.
Figure 1 Photo via Semi
Fears of a downtrend are also making Micron’s P/E low, which makes the stock an attractive buy in terms of valuation.
Micron Technology, Inc. (NASDAQ:MU) has a 10.6% market share in the global NAND flash market, as of the end of June 2016. The company also has about 20% of the DRAM market, as of the end of 2016. Even if NAND or DRAM market lose steam or face uncertainty, Micron will make money from IoT chips, Artificial Intelligence (AI), Big Data and driverless cars industry.
Figures 2 & 3 Photos via Semi
Analysts also think that Micron Technology, Inc. (NASDAQ:MU) is in a strong position to leverage its market dominance after several feuds of Apple with chipmakers like Samsung and Qualcomm. Several analysts have even urged Apple to acquire Micron to fix its chip making stream. Micron Technology, Inc. (NASDAQ:MU) stands a strong chance to get deals from Apple in the near future, which would result in major stock gains and profits.
But overproduction threats should not be ignored. China is firing all cylinders to ramp up its semiconductor production, and cut its reliance on US-based companies. Samsung Electronics plans to invest $18 billion to expand its chips production in South Korea.
The Chinese government has also allocated $160 billion for memory chips production. This would result in overproduction and could dent Micron’s fundamentals. However, it should be noted that Micron’s DRAM and NAND revenue growth is surpassing all its rivals.
Morgan Stanley said in a report on Monday that investors should not there is a “wall of worry” around Micron Technology, Inc. (NASDAQ:MU) stock amid pricing and demand concerns. Morgan Stanley’s analyst Joseph More however gave an “Outperform” rating for the stock with a price target of $36.