Micron (MU) stock rebounded marginally on Friday, closing around 2% higher than it opened. That’s a silver lining for a stock that’s been on a steady trip lower since late March. Shares of MU stock were sitting north of $60 per share at that time and had reached that high on substantial volume.
Source: Mike Deal via Flickr
That marked Micron stock’s highest point since the tech bubble at the turn of the century. Naturally, many investors took their profits and headed for the hills, knocking MU back down below the $50 level.
Micron makes chips. More specifically, it’s one of the largest makers of DRAM and NAND flash in the world. Computers have long been the driver for flash demand, but smartphones are now expanding that pool and many are speculating that driverless cars and the Internet of Things could drive demand ever further into the future.
So, should investors buy into Micron stock on this dip? I believe so. Micron also has a strong outlook, strong fundamentals, strong partnerships with tech behemoths like Intel Corporation (NASDAQ:INTC), and overall strong analyst support.
Shares of MU stock took a tumble when UBS analyst Timothy Arcuri initiated coverage of the company with a $35 price target last month. That ugly price target contributed to the aforementioned slide. But, even factoring in that opinion, the average price target, according to TipRanks, is almost $75. While Micron shares are going to encounter some resistance getting to that level, such optimism should offer investors reassurance that they will be back to the $60 mark from March in no time.
Micron has topped Wall Street’s expectations for earnings in each of the last four quarters. Its profit margin during the trailing 12 months was over 43%. Its PEG ration is 0.15 thanks to price-to-earnings ratios, both trailing and forward, in the single digits.
Analyst estimates for the current quarter have been slowly chugging higher during the last three months, increasing a total of 16% during that time period. The new estimate of $2.84 per share is 75% year-over-year growth for the quarter. Over the next five years, earnings growth is supposed to more than double each year.
Now, some (like Jim Cramer) have expressed caution about Micron stock, suggesting investors not be fooled by the super low multiple and noting that it’s possible earnings could collapse. I don’t disagree. That possibility, to some degree, exists for most stocks!
But, in tech especially, things change pretty fast. Micron is no startup, but it could very easily bend to the will of startups that shake up the markets with regard to IoT, automation, and other money-making trends.
And still, I believe the potential upside outweighs the risk for MU stock, particularly at these levels. I like the overall momentum, I believe it will break through to new highs once it chugs up to the $60 level, and I feel confident the company can deliver the growth it’s projecting.
If you’re looking to play the tech world with a little less risk than Snap Inc (NYSE:SNAP) and a little more earnings growth than Intel, Micron stock should definitely be on your radar.
As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.
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