Shares of several major tech firms with huge semiconductor businesses, Intel INTC, Advanced Micro Devices AMD, and Micron MU, all saw their stock prices surge on Wednesday. Let’s take a quick look why.
Shares of Micron surged 4.61% to close at $56.50 per share after RBC Capital Markets initiated coverage of semiconductor giant with an “Outperform” rating. RBC Capital Markets also slapped an $80 per share price target on Micron, which represents an upside of over 40% from Wednesday’s closing price.
“Our bullish bias on Micron is predicated not on there being no more cycle but rather on our belief that the cycle(s) going forward will be more muted and less volatile," RBC Capital analyst Amit Daryanani wrote in a note to clients Wednesday. "Micron offers a unique way for investors to gain exposure to DRAM and NAND markets at what we view as attractive valuations."
Before today’s gains, Micron’s stock price had skyrocketed 86% over the last year and was up 20% during the last 12 weeks. Micron is also currently a Zacks Rank #2 (Buy) and sports an “A” grade for both Value and Growth in our Style Scores system. This is highlighted by Micron’s outsized top and bottom line growth prospects.
Our current Zacks Consensus Estimates are calling for Micron’s full-year revenues to surge 43.5% to reach $29.16 billion. Meanwhile, the company’s bottom line is projected to skyrocket over 122.6% to hit $11.04 per share.
Intel stock popped 1.34% to hit $54.64 per share, inching closer to its 52-week high. The climb follows Tuesday’s announcement that the company submitted plans to expand its production in Israel. Intel will reportedly invest about $5 billion between 2018 and 2020, according to Israel's Finance Ministry.
With that said, investors are also likely excited to see that the company’s Q2 revenues are projected to climb by 10.5% to hit $16.32 billion, based on our current estimates. Meanwhile, the company’s adjusted earnings are projected to surge nearly 20% to hit $0.86 per share.
The company also remains an attractive value play compared to the “Semiconductor – General” industry as well as the S&P 500. Coming into Wednesday, Intel stock was trading at 13.8X forward 12-months earnings estimates. This marks a discount compared to its industry’s current average of 18.1X and also looks solid against the S&P 500’s 16.9X.
Shares of Advanced Micro Devices climbed nearly 3% to close at $12.82 per share. AMD’s climb came after Susquehanna upped its rating from “Negative” to “Neutral.” Interestingly enough, the firm noted that Intel’s delayed chip production could positively impact AMD.
“A more competitive process technology may increase the likelihood of share gains versus Intel over the next few years, a potential game changer,” analyst Christopher Rolland wrote in a note to clients Wednesday. “We also expect additional share gains to come from the ramp of Ryzen Mobile, and AMD's server product Epyc."
The Susquehanna analyst also upped his AMD price target from $8 per share to $11 per share, which actually represents a downside from Wednesday’s closing price.
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