Has Micron Technology Stock Peaked?

Investing in a stock that has been flying high is risky because it can be difficult, if not impossible, to predict just how high it might go. Micron Technology (NASDAQ: MU), which has been skyrocketing due to strong results as companies have been loading up on memory and storage products, even as prices have been rising, hit a $1 trillion valuation earlier this year.

Its stock price hit a high of $1,255 last month, but it has given back gains since then. In the past month, it has been declining, and on Monday, it was trading more than 25% below that recent high. Is this a sign that the Micron Technology stock may have peaked, or could it still bounce back and rally higher this year?

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Why has Micron stock been struggling?

There hasn't been any negative press to explain Micron's recent struggles. In fact, the company's most recent earnings report showed incredibly strong growth yet again, with net income of $28.2 billion for the May quarter being roughly 15 times what it was in the same period a year ago ($1.9 billion).

However, when a stock has been as hot as Micron has been, there will inevitably be some profit-taking along the way. Even with its decline recently, the stock remains up over 200% this year. With investors being concerned about the possibility of this being another cyclical trend for the industry, there may be the temptation to cash out while the gains are strong.

Further proof is what's happening with another related stock, Sandisk. Its shares have also been coming under pressure in the past month and are now down close to 30% from their 52-week highs. These appear to be macro-related issues that are weighing down Micron and Sandisk. However, that may be of little comfort to Micron investors who bought at higher prices.

Why Micron's stock may not have peaked just yet

There's been lots of volatility in memory and storage stocks this year, and that's evident right now, with this recent downswing. But with the supply shortage likely persisting for multiple years, this may not be the end of the hype in the industry, which is why I wouldn't be surprised if Micron's stock is able to rebound from this recent slide. The growth story could remain a compelling one for investors.

However, it's still a risky time to invest in Micron or Sandisk and related stocks, given how hot they've been of late. Volatile stocks can swing in either direction fairly quickly, and for risk-averse investors, there may be safer growth stocks to consider instead.

David Jagielski, CPA 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.