Micron Stock: Company Trading At 5 Times Fiscal [DETAILS]

Posted On September 6, 2017 3:39 pm

A RAM chip

Micron Technology Inc. shares are up over 46% since the start of this year. Micron stock has an excellent valuation as the company is currently trading at 5 times fiscal 2018 earnings estimates. The firm was dogged by several concerns about chip pricing, but analysts now think that most of these concerns are unfounded.

Major chip buyers including Apple, Cisco and HPE have outlined in their company reports that chip prices are expected to increase. In July, SK Hynix Inc said that its DRAM chips shipments were expected to expand by around 20% in 2018 amid a massive surge in demand due to an increase in server activity worldwide.

Last month, Credit Suisse analyst John Pitzer said the real catalysts for Micron are AI and Cloud computing, as memory lies at the center of the consumption cycle of these technologies.

An AMD processor Related: Should You Buy AMD Stock Over Intel? 

Micron has a clear edge in the chips industry due to a limited number of players. Despite the market fears, the shortage in DRAM supply is expected to continue for several months. According to a report by DRAMeXchange, the demand in the DRAM market bounded back in the second quarter of 2017. Micron is among the top DRAM players in the industry. The report says that Micron stock will keep benefiting from the DRAM demand surge. Also, the company will benefit from the boost in demand amid the launch of iPhone 8.

The company is expected to announce a sterling quarter on Sept. 26, and we believe that now’s the right time to load up on the Micron stock to reap huge profits.

Investors were worried about the slowing demand in the NAND Flash sector as well. But in the second quarter, NAND Flash demand increased by 8% sequentially, crushing the “Wall of Worry” which appears to have stunted the stock growth of Micron.

Several new reports also suggest that there is a dire shortage of 300mm silicon wafers brewing up in the industry. This shortage is expected to peak in 2021. Micron is aggressively working on its 3D XPoint Gen 2 and Gen 3 technology, and plans to launch them by 2019. Analysts think that the industry will welcome the new technology by Micron.

Micron Technology is experiencing a spectacular growth in mobile and Cloud. Several new catalysts are arising, including virtual reality, Internet of Things and gaming.

Related: Should You Buy Sony Stock While Demand is Robust? 

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