Why Micron Stock Keeps Going Up
Key Points
UBS sparked a rally in Micron stock yesterday.
This morning, Barclays added fuel to the fire, pointing out how Micron may no longer be a cyclical stock.
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Micron (NASDAQ: MU) stock joined the trillion-dollar club on Tuesday, surging 19.3% to close above $900 a share after UBS endorsed the stock with a $1,625 price target, predicting Micron will earn more than $100 per share total over the next three years.
And Micron stock isn't looking back. Shares of the computer memory-maker gained another 3.4% through 10 a.m. ET this morning -- and this time, you can thank British banker Barclays for the boost.
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Image source: Micron.
Why Barclays loves Micron stock
Barclays raised its price target on Micron stock an incredible 74% this morning, reports StreetInsider.com, predicting the shares will hit $1,175 within a year. That's a more conservative estimate than the one UBS sounded yesterday, but investors don't seem to mind, because Barclays agrees with its peer that Micron stock is a buy.
The big concern about investing in semiconductor stocks historically has been that they've always been cyclical stocks in the past. Things start well when demand for computer memory is strong, and supply is weak; this causes prices to surge, and profits to fly higher. Next, companies then expand production to capture more profits, increasing supply, depressing prices -- and causing the entire industry to crash.
But this may no longer be the case with Micron. As Barclays points out, Micron just signed its first-ever five-year Strategic Customer Agreement, or SCA, guaranteeing long-term supply purchases at agreed prices across a half decade.
What it means for Micron
Barclays believes similar SCAs may not become the norm, ending the boom-and-bust cycle for Micron and allowing the company to remain consistently profitable in the future. If it's right about this, then Micron might not just hold onto the 830% share price gain it's already achieved over the past year.
Micron could, in fact, go even higher.
Should you buy stock in Micron Technology right now?
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool recommends Barclays Plc. The Motley Fool has a disclosure policy.
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