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Micron: Set up for Further Growth

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The bulls are out in full force for Micron (MU) right now. Over recent months, sentiment has changed toward the memory chip giant. Whereas only a couple of quarters ago, Micron was hampered by unfavorable macro conditions and the semiconductor industry’s cyclical nature, the company appears to be on an upwards curve.

Rosneblatt analyst Hans Mosesmann has been pounding the table on Micron’s behalf for a while now. A recent fireside chat with the company’s VP of Investor Relations has only reaffirmed the analyst’s bullish conviction.

“We come away from the fireside with a more optimistic view of both near-term and long-term trends as they relate to Micron,” the 5-star analyst said. “We reiterate MU as a top pick for 2021, as we see Micron's 1α DRAM and 176-layer NAND helping the company maintain a competitive position against the competition and benefit the company in F2H21 as the memory cycle continues its upswing on traditional supply/ demand dynamics.”

Micron has a significant growth driver in artificial intelligence (AI), says Mosesmann, as “DRAM not only acts as a buffer to enable computing and analyze data at a fast clip, but also becomes a bigger portion of bill of materials (BOM) in new AI servers.”

Furthermore, several applications which use AI such as smart cars, edge, smart photography and 5G, act as content growth drivers.

Throw in the computing market’s fast pace of innovation and the increase in the number of architectures which require additional memory support, and Micron is well positioned to benefit.

Product wise, AI has also substantially increased bandwidth requirements which should be good news for Micron's GDDR6X and HMB products.

As far as the company’s financials are concerned, since 2016, Micron’s profitability has “significantly improved.”

“The company is generating good levels of profitability at all times of the memory cycle,” Mosesmann said, “An important aspect in our opinion, while also generating excess cash.”

All in all, Mosesmann reiterated a Buy rating on MU shares along with a $120 price target. Investors are looking at upside of 49%, should Mosesmann’s thesis play out over the coming months. (To watch Mosesmann’s track record, click here)

Turning now to the rest of the Street, where 2 Hold ratings are swamped by 22 Buys – resulting in a Strong Buy consensus rating. MU's average price target clocks in at $98.52, implying shares will be changing hands for ~16% premium a year from now. (See Micron stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.