Why Micron Stock Keeps Bouncing Higher
Key Points
Bank of America analyst Vivek Arya reiterated a buy rating on Micron today.
Micron is a cyclical stock -- but we are still far from the cycle peak.
- 10 stocks we like better than Micron Technology ›
For the second day in a row, Micron (NASDAQ: MU) stock has managed to maintain its momentum.
Shares of the memory stock inched about 1% higher on Monday after analysts at Morgan Stanley sounded the all-clear for artificial intelligence stocks, confirming revenues are growing fast enough to provide AI hyperscalers sufficient cash flow to buy the semiconductor chips they need. Today, Micron's getting an even more Micron-specific catalyst.
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And Bank of America is behind it.
Image source: Micron.
Not just a buying opportunity -- an enhanced buying opportunity
Writing on StreetInsider.com today, Bank of America's Micron analyst Vivek Arya reiterated his buy rating and $1,550 price target on the semiconductor memory stock. But here's the curious thing:
Arya argues that the Micron bears are actually right about the stock; they're just wrong about the timing. Semiconductors remain a cyclical industry. This means that at some point, supply will catch up with demand, prices will "normalize at some point," Micron's profit margins will decline, and the stock will come down.
But that point is not today -- and normal prices may be higher than you think.
What this means for Micron
Arya blames last week's sell-off in Micron stock on investors jumping the gun and selling the stock literally years before prices have "normalized," rather than reacting to "fundamentals" of the memory market today.
These fundamentals, says the analyst, will keep Micron's earnings elevated for at least a few more years, such that Micron can realistically earn $150 in 2028. Even pessimistically, he sees Micron earning no less than $100 that year, which would be "well above prior-cycle peak of ~$12 in 2018."
Even in the pessimistic view, therefore, Micron stock costs less than 9 times its earnings two years from now -- even cheaper than it costs today.
Should you buy stock in Micron Technology right now?
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Bank of America is an advertising partner of Motley Fool Money. Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.
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