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J.P. Morgan Remains Bullish on Micron (MU) Stock Following Investor Meeting

support@smarteranalyst.com (Ben Mahaney)

Like most companies in the chips industry, Micron (MU) stock is on the rebound. The NAND and DRAM market collapsed in 2018, sending prices in a freefall with stocks to follow. But as many analysts expect prices to begin rising later this year, optimism is back for Micron and others.

JP Morgan analyst Harlan Sur held investor meetings with Micron CEO Sanjay Mehrotra last month, which helped reaffirm his Overweight rating and $64 price target on the stock. (To watch Sur's track record, click here)

Companies in the industry didn’t have much control over their poor performance since the collapse of the chip market. Many negative events were expected, as the industry historically goes through high and low waves. But Sur is impressed with the way Micron is operating over “things that [the company] has control over,” including “technology migrations, developing higher value added solutions, building strong customer relationships, driving more efficiencies in the business, and focus on capital return.”

A major component to Micron’s stock collapse last year has been high inventory. Higher supply has contributed to lower the prices and revenue. This was not a challenge isolated to Micron, but the entire industry — nevertheless, it is something the company is able to control. Sur believes Micron “remains confident that with the actions that they have taken to reign in bit supply that channel and customer inventories exiting the 1H of this calendar year will be approaching normal levels,” which, if successful, would be a major contributor to better prices.

Of course, supply is only one side of the question. Demand has been low during the collapse, as tech sales have generally stalled, especially in China and mobile. Apple is a great example of this, as the company has seen challenges in selling iPhone in China over the past year. But on this, similar to supply, Sur says Micron is “confident on 2H demand growth,” through a number of factors, including new smartphone launches (iPhone), reduction of PC CPU shortages, and a reacceleration of cloud spending trends on compute.

All in all, judging by share prices, Micron investors seem to be betting the company is either out of the woods or has at least found a path out. TipRanks analysis of analyst ratings seems to echo this: There is a consensus Moderate Buy rating on Micron stock, with 13 analysts Buying, nine Holding, three recommending Sell. There is an average price target of $53.89, representing a 36% upside.

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