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Micron (NASDAQ:MU) is playing a game most investors won't be willing to concede. Indeed, it's a game most investors don't even know they're playing. But betting on MU stock isn't a value-minded play. It's not even a bet on rebounding DRAM prices. It's a bet on how other investors are going to perceive Micron's prospects at some point in the foreseeable future.Source: Shutterstock And that's a very tricky game to play.It was almost starting to make sense right before two curve balls were thrown.The first curve ball is, of course, a trade war that took dead aim at China's consumer-tech outfit Huawei, which by itself accounts for -- or accounted for -- 13% of Micron's revenue. The other curve ball is the advent of China's new DRAM maker Changxin Memory, which should be able to scoop up from Chinese business from MicronInvestorPlace - Stock Market News, Stock Advice & Trading TipsLargely lost in the discussion is the fact that MU stock is now trading at what can only be described as a stupidly low trailing P/E of 3.1. The forward-looking P/E of 8 makes it more than twice as expensive into its most plausible future, though that's still dirt cheap.According to Bank of America Merrill Lynch that valuation says the worst-case scenario is more than priced in. TheStreet's Tiernan Ray agrees, adding a psychological element to the matter:"With no remedy to DRAM's woes this year, it certainly seems the bears have been given just about everything they could hope for in terms of bad news. That may mean a pick-up in shares as the market discounts better times in 2020." * 7 Value Stocks to Buy for the Second Half It seems counterintuitive, at first, and perhaps it is. It'sa perfect synopsis of the headache at hand. The cyclical bottom for DRAM prices and the cyclical bottom in bearish sentiment surrounding MU stock aren't even close to being synchronized.The added trouble is, nobody truly knows how close we are to either bottom. It's entirely possible both are behind us. MU Stock Investors Have Selective VisionIt's not as if investors haven't struggled with erroneously estimating the depths of trouble before.When computer sales peaked in 2011, shares of the HewlettPackard arm that eventually became the consumer-oriented HP (NYSE:HPQ) initially tumbled, but turned around between 2013 and 2014. PC and laptop sales not only continued to fall, they began to slide in earnest in 2015, wiping away a huge chunk of that rebound.HPQ has since recovered, making a turnaround move in 2016 that persisted through most of 2018. The point isinvestors confused hope with results.Another case of misguided assumptions involves General Electric (NYSE:GE).Although shares of the iconic blue chip turned around in 2009 like most other stocks did, neither sales nor earnings have grown since 2008. And that's even after stripping out the impact of divestitures. Investors largely convinced themselves for years that GE would work its way out of trouble, until 2017 when it became clear that wasn't going to happen.The 80% rout suffered during the second half of 2018 essentially priced in eight years' worth of deteriorating results too few people were willing to see.Neither comparison is a carbon copy of what's making Micron stock so tough to handicap now, though the underpinnings are the same. Namely, investors see the facts they want to believe, and ignore the facts that might conflict with their established conceptions.The masses have largely convinced themselves that Micron is unsalvageable right now. They hold up Changxin Memory and the trade war as evidence, all the while ignoring the fact that Changxin's IP leaves something to be desired, and that the trade war could end at any time as long as an unpredictable President Donald Trump occupies the White House.Meanwhile, DRAM prices are still falling. That's leading many would-be buyers to assume they'll fall in perpetuity, though that's clearly not going to be the case.None of those factors are minor matters. Bottom Line for MU StockIt's not a bearish or a bullish call. It's just a much-needed reminder to not assume the rhetoric surrounding any stock at any given time is accurate. It might be, but it may well not be. And when that stock is a well-watched ticker like MU stock that inherently inspires emotional responses, the rhetoric is all the more skewed.There's no denying the stock's trading at bargain prices right now. Bank of America and Tiernan Ray are both right in that regard. The value argument holds water, even if the DRAM glut and the tariff standoff persist.Value isn't enough though. As irrational as the doubts working against Micron right now may be, as John Maynard Keynes told us decades ago, "the market can stay irrational longer than you can stay solvent."The best course of action here may be to not play the game at all but to find another stock that's proving more predictable.As of this writing, James Brumley held no positions in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter at @jbrumley. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * 7 Value Stocks to Buy for the Second Half * 7 Hot Stocks to Buy for a Seemingly Sleepy Summer * 6 Chip Stocks Staring At Big Headwinds in 2019 Compare Brokers The post Micron Stock Presents Too Much of a Trading Conundrum appeared first on InvestorPlace.
If the Fed doesn't signal significant easing ahead, the markets could nosedive. Many analysts agree that the markets might be overpricing the Fed's rate cuts this year.
Apple (AAPL) seems to be exploring options to partially move its iPhone and other product manufacturing out of China. Apple wants to move ~15%–30% of its production out of China.
On June 18, the broader market rose sharply after President Trump’s tweet raised the possibility of a near-term solution to the ongoing US-China trade war. The US chip industry has been impacted by the trade war.
The past year has been a rough one for Micron (NASDAQ: MU) stock investors. Shares of Micron stock are down 45% from a year ago, but long-term investors should be considering buying the dip.Source: Micron The memory market has been weak, and Micron has certainly suffered. However, there are at least three reasons why the worst has now passed for MU stock, according to Bank of America analyst Simon Woo. MU Stock Is Fairly ValuedDespite ongoing weakness in the memory market, Micron's big sell-off has the stock valued attractively. In fact, the stock has recently traded at or below projected book values for fiscal 2019 through fiscal 2021. The stock's PE ratio of 3.0, its forward PE ratio of 7.8 and its price-to-free cash flow ratio of 4.7 are all absurdly low.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 5 Stocks to Buy for $20 or Less Sure, given the market weakness one could argue these valuation metrics deserve to be low. After all, revenue and net income were down 20.6% and 51.0% last quarter, respectively. However, assuming you believe the pricing weakness in the NAND and DRAM markets will eventually recover, Micron stock has no business at its current valuation.Many of the stocks trading at single-digit earnings multiples are facing secular, not cyclical headwinds. Companies like Macy's (NYSE: M), Kroger (NYSE: KR) and HP (NYSE: HP) arguably deserve their low single-digit earnings multiples. Micron does not. 2\. Micron Is Still ProfitableDespite a cyclical downturn in the memory market, a softening global economy and a trade war between the U.S. and China, Micron is still profitable. It's a perfect storm for Micron bears at the moment. Yet the company reported $1.42 in EPS last quarter.Maybe it will take a quarter or two for the market to stabilize and for Micron's business to return to growth. In the meantime, how much more downside can traders expect out of a stock that has relatively strong underlying fundamentals?China accounts for roughly half of Micron's sales, and the recently blacklisted Huawei accounts for 13%. Bank of America is projecting a 20% quarter-over-quarter decline in DRAM prices in the fiscal fourth quarter. Yet even though everything is going wrong for Micron, Woo says the company will likely maintain operating margins above 20%.Fiscal 2019 through 2021 EPS will be in the $3 to $5 range, according to Woo. Even assuming the $3 low end of that estimate range, it still means the stock is trading at a forward PE of under 11. Maybe there's not tremendous upside if Micron's numbers disappoint. But it's very difficult to see much wiggle room to the downside from current levels. 3\. Expectations Are Extremely LowOne of the reasons why it will take a lot for Micron to trigger additional selling volume is because expectations are already so low. Woo says Micron will likely report a modest earnings miss later this month. However, the stock is already down 12.4% in the past month and 15.7% in the past three.Woo says even a guidance cut from Micron management might not move the stock."A bearish guidance at the 3Q FY19 results call and consequent consensus estimate cuts should not be a surprise for investors," Woo said.In addition, minimal debt, positive free cash flow and disciplined capital spending provide plenty of cushion for Micron's business. The company has the financial flexibility to weather the storm."We do not expect consensus estimate cuts or bearish guidance (for Nov'19-end quarter) to be a negative surprise, given investors' low expectations," Woo sais.Finally, potential bullish catalysts, such as a trade war deal, are certainly not priced into MU stock. In fact, Woo says DRAM pricing should stabilize and begin to rise again throughout fiscal 2020. He estimates Micron will return to earnings growth beginning in the fiscal first quarter. Bottom Line on Micron StockYes, things have been bad for Micron. Yes, the memory market is still very weak. But semiconductor investors know the industry is prone to cyclical downturns. The current downturn has been rough for Micron. However, all things considered, its business has held up relatively well.Secular demand for memory hardware isn't going away anytime soon. Micron's market will improve, and investors will once again appreciate the stock's value. Traders who buy now may be getting in a bit early. But with valuation providing a near-term floor, the risk-reward balance is firmly skewed to the upside.Bank of America has a "buy" rating and $43 price target for MU stock.As of this writing, Wayne Duggan did not hold a position in any of the aforementioned securities. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * 5 Red-Hot IPO Stocks to Buy for the Long Run * 5 Stocks to Buy for $20 or Less * 4 Dow Jones Stocks Ready to Rise Compare Brokers The post 3 Reasons to Keep Ignoring Bad News and Keep Buying Buy Micron Stock appeared first on InvestorPlace.
Chip stocks have been on a volatile ride over the past year as investors have struggled to grapple with where exactly the semiconductor industry goes next.The iShares PHLX Semiconductor ETF (NASDAQ:SOXX) rallied to all-time highs in mid-2018 as the industry broadly benefited from record cloud data-center spend, steady PC and smartphone growth, strong global auto growth and burgeoning demand in the AI and IoT end-markets. But, in late 2018, the SOXX ETF tumbled more than 25% on concerns that a slowing global economy was going killing all that robust demand, at the same time that supply was building across the whole sector.Chip stocks shrugged off those fears in early 2019. As the global economy stabilized and recession fears disappeared, so did concerns regarding a slowdown in the semiconductor space. The SOXX ETF rallied back to all-time highs by late April 2019.InvestorPlace - Stock Market News, Stock Advice & Trading TipsThen, another sell-off began. Trade tensions re-escalated. Recession fears came back. So did concerns surrounding global semi demand. Chip stocks sold off. They remain in selloff mode today. As of this writing, the SOXX ETF trades 15% off its April 2019 highs.What's next in this wild trip for chip stocks? Tough to say. But, it is easy to say that these stocks are broadly staring at big demand headwinds in 2019.The PC and smartphone markets globally are flattening out, because everyone who wants either a computer or a smartphone, already has one. Global auto sales are dropping, especially in China, as consumers continue to express caution with the global economy slowing. Big tech companies are likewise acting more cautiously, and record data-center spend in 2018 is coming down in 2019. * 7 Top-Rated Biotech Stocks to Invest In Today Net net, the backdrop isn't great for chip stocks right now. As such, investors should be cautious when considering an investment in any of the following chip stocks. Micron (MU)Source: Shutterstock One of the riskiest chip stocks here and now is memory chip giant Micron (NASDAQ:MU), for the simple reason that the memory market is notoriously and violently cyclical.In the memory market, it's all about supply-demand fundamentals. When demand is high and supply is low, memory chip prices are high, and memory chip-makers make boat loads of profits. But, when demand is low and supply is high, memory chip prices are low, and memory chip-makers make no profits. Unfortunately, supply and demand in the memory market cycle often and dramatically. Eras of high demand and low supply are usually followed by eras of low demand and high supply. Just look at a chart of Micron's profits or stock price over the past two decades.Right now, we are in the process of the memory market going form high demand and low supply, and to rising supply and falling demand. The rising supply part seems to be moderating. But, the falling demand part isn't moderating, mostly because rising geopolitical tensions continue to dilute memory chip demand. So long as that remains true, Micron's profits will continue to drop, and so will MU stock.As such, until the global memory market demand picture turns positive, MU stock will have a tough time staging a big turnaround. Broadcom (AVGO)Source: Shutterstock One of the biggest semiconductor companies in the world, Broadcom (NASDAQ:AVGO), is not exempt from the macro factors diluting demand across the global semi industry.Broadcom just reported solid second-quarter numbers, which broadly topped expectations and included double-digit revenue growth alongside healthy margin expansion. But, management also delivered a significantly sub-par, full-year guide thanks to what they are calling a "broad-based slowdown in the demand environment". The culprit? Rising geopolitical uncertainties that are causing customers to reduce inventory levels.So long as this slowdown persists, AVGO stock will have a tough time rallying. The stock isn't particularly cheap here relative to its historical standard, at 12-times forward earnings today versus a five-year average forward multiple of 13. As such, you have a stock with not-so-good, go-forward fundamentals, trading at a historically average valuation. * The 7 Best Tech Stocks to Buy for the Second Half of 2019 That's not a great combo. Until this stock gets cheaper -- or until the fundamentals improve -- AVGO stock will likely fail to rally. Qualcomm (QCOM)Source: Shutterstock The story at Qualcomm (NASDAQ:QCOM) is riddled with question marks. All those question marks against the backdrop of a depressed semi market backdrop could keep QCOM stock stuck in neutral for the foreseeable future.Qualcomm scored a huge win recently, when Apple settled with the chip giant, paid the company a huge lump sum royalty payment and came back on as a Qualcomm customer. Shortly after that, though, it was ruled that Qualcomm's patent royalty practices violated U.S. antitrust law. That's a big deal, since most of Qualcomm's profits come from the high-margin licensing business. The ruling broadly implies that the licensing business is going to have to change, and in a way that will probably dilute profits.Consequently, investors are stuck asking themselves exactly what Qualcomm's licensing business will look like in a few years. The truth is, no one knows. Investors don't like uncertainty. They especially don't like uncertainty when it comes against the backdrop of a depressed macro semi market struggling with falling demand and geopolitical tensions.To be sure, none of these issues will last for QCOM stock. The stock does look like a good long-term buy here, since long-term fundamentals are healthy. But, near-term uncertainty will ultimately keep QCOM stock depressed for the foreseeable future. Advanced Micro Devices (AMD)Source: AMD The story at Advanced Micro Devices (NASDAQ:AMD) is a bit different than the story supporting other chip stocks at the current moment.Specifically, the story at AMD is actually much better. AMD has taken an innovation lead over competitor Intel (NASDAQ:INTC) in the CPU market, and it has leveraged that innovation lead to rapidly grow market share over the past several quarters. This market share expansion has driven out-sized revenue growth and margin expansion, which has produced robust profit growth. This market share expansion narrative projects to persist for the foreseeable future, meaning AMD should continue to report pretty good numbers.But, this market share expansion is happening in a market that's struggling with falling demand. At the core of this falling demand is reduced cloud data-center spend from the titans of tech. This spend reduction is a temporary phenomena. But, so long as it lasts, AMD's numbers won't be as good as they need to be, to support the stock's near 50-times forward multiple. * 10 Tech Stocks to Buy Now for 2025 As such, while the story at AMD is better than the story for other chip stocks, the stock is not exempt from macro demand headwinds, and those macro demand headwinds could ultimately hinder the richly valued AMD stock from rallying much further. Nvidia (NVDA)Source: Shutterstock When it comes to shares of GPU giant Nvidia (NASDAQ:NVDA), you have a situation of near-term pain and long-term gain.In the near term, Nvidia will continue to struggle with inventory and pricing issues as cloud data-center spend moderates against the backdrop of a slowing global economy and rising geopolitical tensions. So long as these inventory and pricing issues remain, revenue growth at Nvidia will remain tepid, while margins will remain under pressure. NVDA stock will struggle to rally.In the long term, Nvidia will work through these inventory and pricing issues since secular tailwinds support robust demand for the next several years in the data and AI-related markets that Nvidia services. Once those issues are cleared, big revenue growth will come back into the picture, as will margin expansion. This combination will power healthy profit growth, and that healthy profit growth will drive NVDA stock higher.Net net, the situation at Nvidia is one defined by near-term pain and long-term gain. Thus, depending on your time horizon, NVDA stock is either an avoid here, or a good buy. Texas Instruments (TXN)Source: Shutterstock Over at semiconductor giant Texas Instruments (NASDAQ:TXN), you have a chip stock that has worrisome exposure to the slowing global auto market.Texas Instruments views the industrial and auto markets as the best markets in the semiconductor space, and as such, has focused their resources on maximizing exposure to those markets. Over 50% of revenues now come from the auto and industrial markets. Four to five years ago, that number hovered around 40%.The problem here is that the auto market is fading globally. China auto sales have been tumbling for several months. The U.S. auto market has been weak lately, even with low interest rates. The European auto market is seeing declines for the first time since 2013. Broadly, after several years of red-hot growth, the global auto market is in retreat, and that's not good news for Texas Instruments. * The 10 Best Index Funds to Buy and Hold At the same time, TXN stock isn't cheap for a semi stock, trading at 20-times forward earnings. That combination of a not-cheap valuation and mounting headwinds in the company's most important market, ultimately means that TXN stock may not have much room for further upside in the foreseeable future.As of this writing, Luke Lango was long QCOM and INTC. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * 5 Red-Hot IPO Stocks to Buy for the Long Run * 5 Stocks to Buy for $20 or Less * 4 Dow Jones Stocks Ready to Rise Compare Brokers The post 6 Chip Stocks Staring At Big Headwinds in 2019 appeared first on InvestorPlace.
Semiconductor stocks have spiraled upwards today. The VanEck Vectors Semiconductor ETF (SMH) is up 4.6% currently, while the iShares PHLX SOX Semiconductor ETF (SOXX) is up 4.9%. Though trade war concerns remain, some stocks like NVIDIA might be undervalued due to their recent declines.
(Bloomberg) -- Shares of semiconductor companies rallied on Tuesday as optimism that trade tensions between the U.S. and China could be easing pushed investors to look past a growing consensus that an industry rebound is unlikely to occur in the second half of the year.The Philadelphia semiconductor index advanced as much as 5%, compared with a 1.4% increase in the S&P 500 Index. Among notable gainers, Nvidia Corp. rose 6.8% while Micron Technology Inc. jumped 6.8% and Western Digital Corp. added 6.4%. Texas Instruments Inc. gained 4.2% while Intel Corp. rose 4%.The advance came after President Donald Trump said he had a “very good” phone conversation with Chinese President Xi Jinping and that he would hold an “extended meeting” with him at the G-20 meeting. Trump had previously threatened to raise tariffs if Xi didn’t sit with him at next week’s meeting in Japan.Chipmakers have been highly correlated to the trade issue, as the companies derive a hefty percentage of their revenue from China. The country is also a key part of their supply chains. Recently, semiconductor volatility rose after the Trump administration blacklisted Huawei, a major consumer to a number of semiconductor companies. Last week, Broadcom Inc. cut its full-year sales forecast because of trade risks and its Huawei exposure.“Huawei casts a large shadow,” Stifel analysts wrote on Tuesday. “There is no getting around its significance.” Analyst Brian Chin lowered his estimates for a number of semiconductor companies for the second half of the year, saying that the industry’s “malaise” in May was “now too acute to ignore.”That view was echoed by analysts at KeyBanc Capital Markets in a report dated June 17. The firm wrote that “the recent U.S./China trade war escalation, including the Huawei ban, has dashed hopes for a 2H recovery for broad-based semiconductors.” Analyst Weston Twigg added that a trip to Asia “left us more cautious” on the industry, and that there was an “increased risk to forward estimates” as the trade dispute “has led to a meaningful decline in bookings.”Deutsche Bank analysts recently returned from an Asia trip of their own, emerging “more cautious on the semiconductor and semicap sectors” as a result, “especially given that the often promised H2 rebound is looking increasingly optimistic.”Analyst Rob Sanders wrote that trade tensions were “significantly elevating uncertainty surrounding near- and mid-term business conditions,” and that “in most instances, this uncertainty is acting as a headwind to demand.”The escalation in trade-related tensions came at a time when the industry has already been struggling with weak demand and high inventory levels. According to the Semiconductor Industry Association, total semiconductor sales sank 17.7% in April, its most recent month of data.To contact the reporter on this story: Ryan Vlastelica in New York at email@example.comTo contact the editors responsible for this story: Catherine Larkin at firstname.lastname@example.org, Jennifer Bissell-Linsk, Richard RichtmyerFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Shares of Advanced Micro Devices Inc. shot up 5.6% in very active trading Tuesday morning, putting them on track for their first gain in six days amid a broad rally in chip stocks. Volume of 37.4 million shares made AMD's stock the most actively traded on major U.S. exchanges. The stock had tumbled 12% over a five-session losing streak through Monday. AMD's rally comes as the PHLX Semiconductor Index climbed 4.6%, with all 30 components gaining ground, led by the 6.5% jump in Micron Technology Inc. shares. Meanwhile, chipmaker Intel Corp.'s stock rallied 3.7% to pace the Dow Jones Industrial Average's gainers.
Micron (MU) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.
Micron's (NASDAQ:MU) situation continues to deteriorate. With its margins waning and its revenue and profitability falling, MU stock price has fallen meaningfully from its highs. Just two months ago in April, Micron stock was trying to break out and exceed $45. What happened?Source: Shutterstock While the trade war was seemingly heading towards a friendly resolution a few months ago, a tweet from President Trump sent those assumptions down the drain. The tweet sank the stock market, as the PowerShares QQQ ETF (NASDAQ:QQQ) calmly shed 11.5% in the month of May.However, it's had a much more devastating impact on semiconductors, chip makers and memory producers. For instance, Nvidia (NASDAQ:NVDA) tumbled more than 23% in May, MU stock dropped almost 26% from peak to trough and Lam Research (NASDAQ:LRCX) dropped roughly 18%.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 5 Stocks to Buy for $20 or Less Comments that Broadcom (NASDAQ:AVGO) made in conjunction with its second-quarter results didn't help. On Thursday evening, the chip maker said it expects first-half headwinds to persist in the second half of the year, after previously expecting them to lift. That caused Broadcom to issue full-year revenue guidance that was well below analysts' average estimate ($22.5 billion vs. $24.31 billion), inflicting even more pain on the group. What About the Valuation of Micron Stock?Too many people look at MU stock and assume it's a buy because of its low valuation. Many understand how price-earnings (P/E) ratios work, but some don't. They see Micron stock trading at four or five times its earnings and say, "That's a buy to me!"What they don't consider is the very basic equation of the P/E ratio. Quite simply, the ratio is price divided by earnings. When a company's stock falls and its earnings stay flat, its valuation or P/E ratio falls, making it more attractive. However, when companies' earnings fall, their stocks become more expensive.When both price and earnings fall -- which is what's been happening to Micron -- the company's P/E can remain almost constant. Last July, MU stock was trading at almost $60. Analysts' average estimate called for earnings of almost $12 per share during the fiscal year, giving MU stock a forward P/E ratio of about five. Fast forward to June 2019 and the forward consensus earnings estimate has cratered almost 50%, down to $6.35 per share. So, too, has the stock price, which is also down almost 50%.That's not surprising. The decline in estimates, in conjunction with the decline of MU stock, has kept the P/E ratio relatively constant. Thus, MU stock isn't that much cheaper now than it was in the past. Micron's Underlying BusinessNAND memory is a component of Micron's business, making up roughly 30% of its total revenue last quarter. However, another form of memory, DRAM, is the largest piece of MU's pie, making up 64% of its total revenue.Micron's President and CEO, Sanjay Mehrotra, said this about NAND and DRAM:"NAND markets remain oversupplied from the acceleration in bit growth driven by the industry transition to 64-layer 3D NAND. Although fiscal Q2 pricing came in below our expectations, we are optimistic that demand elasticity and seasonal trends will support improving demand growth in the second half of the calendar year.Since our last earnings call, DRAM pricing weakened more than expected. Our demand outlook for calendar 2019 has moderated, led by somewhat greater levels of customer inventory, weakening server demand at several enterprise OEM customers and worse-than-expected CPU shortages."Other executives have made unfavorable observations about memory:Anthony Neri, president and CEO of Hewlett Packard Enterprise (NASDAQ:HPE): "So the overall commodity environment continue to be favorable and there is an oversupply now compared to last year's as you recall there was shortages and costs going up. The DRAM prices are down."Dion Weisler, CEO of HP Inc (NASDAQ:HPQ): "I think broadly speaking, we have seen some easing around the overall supply chain costs in the basket of commodities and logistics."Kelly Kramer, CFO of Cisco Systems (NASDAQ:CSCO), also said the company was benefiting from reduced DRAM prices. Trading MU Stock Click to EnlargeMicron's price action was very discouraging last week , with MU stock topping out near $36. It's now down about 8% from those levels.If MU stock falls below Friday's lows, it could be in some trouble. Those lows buoyed Micron stock in late May and early June. If they can't do so now, then MU stock could tumble to $30. If the selling pressure doesn't relent, it could continue even lower.Now that semis and tech have caught a bid, see if Micron can hurdle $34 and its 20-day moving average. Otherwise, Micron stock looks risky on the long side in the short-term, particularly with a percolating trade war.With all that said, Micron is a boom-bust company. When its business is tough -- like now -- the ride is rough for investors. When its business is good -- and it eventually will be -- MU stock will be a huge winner. Even if MU slides further from here, it will likely be a good hold over the long term. DRAM and NAND aren't going anywhere, and neither is MU stock.Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long NVDA. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * 5 Red-Hot IPO Stocks to Buy for the Long Run * 5 Stocks to Buy for $20 or Less * 4 Dow Jones Stocks Ready to Rise Compare Brokers The post Should Micron Stock Be Bought or Sold? appeared first on InvestorPlace.
Editor's note: This story was previously published in May 2019. It has since been updated and republished.The tech sector endured some pretty tough times last year. Even Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Facebook (NASDAQ:FB) struggled.Source: Shutterstock But if we put these troubles aside for a moment and focus on the longer-term outlook, a different picture emerges. Stretching out to 2025, some of these big-name tech stocks begin to look very attractive indeed -- especially at their current price levels.InvestorPlace - Stock Market News, Stock Advice & Trading TipsIn order to pinpoint which tech stocks will be leading the way seven years from now, I turned to a recent report from RBC Capital. Its "Imagine 2025" portfolio selects the tech stocks the firm believes will be winning on a long-term basis. "We believe the following names are best positioned to outperform over a seven-year time horizon through 2025," writes the firm. * 5 Stocks to Buy for $20 or Less What does this mean for now? It means longer-term investors should think twice before selling the stocks listed below, while other investors may want to keep a close eye on the following stocks as potential buy on the dip opportunities.Here are the top tech stocks primed to outperform over the next few years: Alphabet (GOOG, GOOGL)As I said above, Alphabet has not been immune to the market's choppiness but that doesn't mean it's still not one of the top stocks to buy.Source: Shutterstock But at the end of the day this is still a killer stock pick with a "strong buy" analyst consensus on TipRanks. This is with a $1,346 average analyst price target."AMZN and GOOGL, in particular, appear to have invested the most in AI competencies and have the Big Data access and Compute Power infrastructure to benefit most from AI and ML developments," writes RBC Capital.And Google has an extra string on its bow: its self-driving car unit Waymo. Alphabet disclosed that Waymo reached the 10 million miles of autonomous vehicle driving milestone."GOOGL appears particularly well situated to lead autonomous vehicle innovations, given its substantial investments in Waymo autonomous vehicle technology" cheers the firm.Luckily for Alphabet, RBC believes autonomous vehicles will be arguably one of the biggest applications of AI.Interested in GOOGL stock? Get a free GOOGL Stock Research Report. Nvidia (NVDA)Nvidia (NASDAQ:NVDA) is pushing the boundaries of technology and this should pay off over the years to come.Source: Shutterstock Even though Nvidia is suffering over the last six months, the long-term picture remains very compelling making this one of the top stocks to buy and hold.For example, Jefferies analyst Mark Lipacis (Track Record & Ratings) calls the January quarter a setback. However, he says Nvidia remains "a top play on secular themes" in AI, gaming and autonomous vehicles. He tells investors to "buy the confession." * 7 Top-Rated Biotech Stocks to Invest In Today "While there are no guarantees of a winner in the AI race, we think Nvidia is well ahead of its peers and is continuing to gain traction due primarily to the value of Cuda software," says RBC Capital. It estimates over one million engineers working with Cuda and calls it "the secret sauce that underlies the entire ecosystem." Get the NVDA Stock Research Report. Amazon (AMZN)You probably aren't surprised to see Amazon (NASDAQ:AMZN) on this list. The ecommerce company is consistently innovating for the future, be it through acquisitions, technology or entering new markets.Source: Shutterstock One interesting advancement for the company is in the field of robotics. "Amazon appears particularly well situated to lead robotics innovations, given its ongoing investment in Kiva logistics robots," points out RBC Capital.The company already deploys something to the tune of 100K Kiva robots, basically a robot army. And it's now looking increasingly likely that a very large percentage of Amazon's distribution workforce will be complemented with these robots by 2025.As RBC concludes, the impact of this should be greater operational efficiency for AMZN stock.Another interesting trend to consider when you're looking at tech stocks to buy: AI-powered Voice Recognition will likely improve significantly from current levels, allowing even better use of internet apps via voice commands. Again, Amazon should be a major beneficiary of this trend.Notably, AMZN boasts one of the best ratings on the Street. This comes with a $2,215 average analyst price target. Get the AMZN Stock Research Report. Rapid7 (RPD)If you are looking for cheaper long-term stocks to buy, look no further than Rapid7 (NASDAQ:RPD). This company uses a unique data- and analytics-driven approach to cybersecurity.Source: Shutterstock The stock is highlighted by RBC as an attractive name in the cybersecurity space, particularly following the recent acquisition of Komand. The company snapped up Komand in 2017 to boost its security orchestration and automation offering."The need for well-designed security and IT automation solutions is acute; resources are scarce, environments are becoming more complex, all while threats are increasing," says Corey Thomas, CEO of Rapid7. * 10 Stocks to Buy That Wall Street Expects to Soar for the Rest of 2019 "Security and IT solutions must evolve through context-driven automation, allowing cybersecurity and IT professionals to focus on more strategic activities."Plus RBC's Matthew Hedberg (Track Record & Ratings) is behind the stock. "Success has continued to highlight the power of the platform approach with impressive cross-sell metrics driven by combining security and IT Ops" concludes the analyst. Get the RPD Stock Research Report. Splunk (SPLK)"Within our software universe, we would highlight Splunk (NASDAQ:SPLK) as a likely winner in the big data category," writes RBC Capital.Source: Web Summit Via FlickrSplunk basically turns machine data into answers. It produces software for searching, monitoring and analyzing machine-generated big data, via a web-style interface.In part, these answers are generated through the firm's machine learning system. Splunk provides the Machine Learning Toolkit, a guided workbench to create and test flexible models that can handle any use case."A key value of creating models in Splunk is that users can seamlessly apply them to real-time machine data" says RBC Capital.Plus RBC isn't the only firm singing the stock's praises. This "strong buy" stock has a $155 average analyst price target. Get the SPLK Stock Research Report. PayPal (PYPL)If we turn to financial tech stocks to buy, analysts are upbeat on"moderate buy" stock PayPal (NASDAQ:PYPL) right now. This is with a $1117 average analyst price target.Source: Shutterstock First of all, PayPal offers massive scale. And second it boasts a unique two-sided model among tech stocks, with both consumers and merchants onside. This means the company can control the entire consumer experience."PayPal's unique assets enable the company to tap into the long-term global shift to digital commerce" says RBC Capital. * 7 High-Quality Cheap Stocks to Buy With $10 Plus the firm sees the company as a champion of democratizing finance around the globe. "We believe its growing platform of assets will open up the ~2B people around the world who lack financial services."Similarly top Oppenheimer analyst Glenn Greene (Track Record & Ratings) notes PYPL's "unique" competitive position. He is even more confident in the stock following recent partnerships, and anticipates high-teens revenue growth and 20%-plus EPS growth for the next several years. Get the PYPL Stock Research Report. Apple (AAPL)RBC Capital sees a long runway for Apple (NASDAQ:AAPL) stock.Source: Shutterstock "We think AAPL could be a major beneficiary of AI and VR/AR-related trends, which could generate significant tailwinds for its services business," it writes. It notes that the latest iPhones are equipped with the ability to recognize patterns, make predictions and learn from experiences.What's even more interesting is that by 2025 we could be looking at the first real "iPhone generation." 2025 is 18 years from the launch of the first iPhone.For people who grew up with iOS devices, Apple could have data on every app a person installed, on every flight, book and purchase, as well as academic records, health statistics, family background and more.Now imagine an AI trained on this data set. "This AI would truly be a 'personal' assistant. A hyper-customized neural network that would be so powerful, it would make an existing services pool very strong and usher in a host of new offerings that can only be imagined" says the firm. Get the AAPL Stock Research Report. Synopsys (SNPS)That makes this one of the best stocks to buy in the chip sector is that it is pretty much a guaranteed winner of future tech trends. Someone needs to design AI chips and that someone is Synopsys (NASDAQ:SNPS).Source: Shutterstock Synopsys is essentially an "arms dealer" for AI and all things chip related says RBC Capital."By helping design complex chips, Synopsys is in the thick of AI in terms of design," the firm writes. And the best part is that it doesn't even matter what new companies come along they will still need Synopsys. * 7 Stocks to Buy for the Coming Recession "As new and existing companies continue to push the edge of technology, Synopsys will be helping the companies design each chip regardless of it being a GPU, CPU, FPGA, Digital Chip, Analog chip or otherwise" the firm explains.Even now, the stock looks bullish with a "strong buy" analyst consensus and $109 average analyst price target. Get the SNPS Stock Research Report. Micron (MU)One of the great secondary chip stocks to buy is Micron (NASDAQ:MU). All future trends result in data creation and Micron is perfectly positioned for this with its DRAM/NAND memory portfolio.Source: Shutterstock "The incredible amount of data generated by AI, AR/VR and autonomous driving would require significantly higher memory, both NAND and DRAM, leading to strong and long-term tailwinds for MU" writes RBC Capital.Plus we could be looking at a compelling entry point. Indeed, Deutsche Bank's Sidney Ho (Track Record & Ratings) points out that shares appear cheaper right now. He has just reiterated his "buy" rating with a $60 price target.And the tech stock still retains its "moderate buy" analyst consensus rating. This is with a $54 price target. Get the MU Stock Research Report. Microsoft (MSFT)Last but not least, make sure to make room for Microsoft (NASDAQ:MSFT). This is a company that ticks all the boxes when it comes to the best stocks to buy for future trendsSource: Shutterstock "Leading hyperscale hybrid cloud platform with big runway of growth in AI, IoT, Gaming and other services" explains RBC on the stock's inclusion in its 2025 portfolio.Like GOOGL and AMZN, MSFT stock benefits from 1) massive amounts of raw compute power; 2) large data sets; and 3) ability to hire the smartest data scientists on the planet.It picks Microsoft as the No. 1 AI company in the public cloud space. This is thanks to the company's rapidly growing Azure cloud platform. * 7 Dark Horse Stocks Winning the Race in 2019 "We believe Microsoft is in an enviable position vs other public cloud competitors as their customers can also leverage AI and ML capabilities on premise, something [Amazon's] AWS and [Google's] GCP can't deliver natively" points out RBC Capital.Also note the stock's killer "strong buy" rating with 20 out of 21 analysts bullish on the stocks prospects. Top this off with a $142 average analyst price target for upside of 17% and I would say Microsoft is one of the most appealing tech stocks to buy and hold onto! Get the MSFT Stock Research Report.TipRanks.com offers exclusive insights for investors by focusing on the moves of experts: Analysts, Insiders, Bloggers, Hedge Fund Managers and more. See what the experts are saying about your stocks now at TipRanks.com. As of this writing, Harriet Lefton did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * The 10 Best Stocks to Buy for May * 7 Stocks Worth Buying When They're Down * 7 of the Best ETFs to Buy for a Slowing Economy Compare Brokers The post 10 Tech Stocks to Buy Now for 2025 appeared first on InvestorPlace.
Micron (NASDAQ:MU) has been having a less than stellar 2019. At this point one year ago, MU stock was trading near $60. On Friday, it capped a week of losses with Micron stock closing at $32.66, sliding another 2.16%. The company is being hit by the usual cyclical nature of the DRAM business, its primary revenue generator. But what's spooking many investors is the China effect.Source: Micron This is something relatively new, and what's making it even worse for MU than other U.S. chipmakers is that the trade war has spurred Chinese competition that will end up eating into its core business even when the current spat is over. The Cyclical Nature of DRAMDynamic random-access memory is a key component of technology ranging from computers to smartphones to smart cars. American chipmaker Micron is the world's third-largest supplier of DRAM, after a pair of South Korean companies: First-place is Samsung and second-place is SK Hynix. DRAM is Micron's core product, and primary source of revenue.InvestorPlace - Stock Market News, Stock Advice & Trading TipsMost investors in MU stock recognize that the DRAM market tends to be cyclical in nature. Demand for the products that rely on the component goes up and down, that has a big impact on MU revenue. In 2017, global demand for DRAM was high, as companies like Alphabet's (NASDAQ:GOOG, NASDAQ:GOOGL) Google expanded their server capacity in the race for artificial intelligence dominance. High demand pushed up DRAM prices, and revenue for companies like Micron. As a result, MU stock was approaching the $50 level as 2017 closed out. The party continued in early 2018 -- Micron stock topped $61 -- before the bottom began to fall out of the DRAM market. * The 10 Best Index Funds to Buy and Hold With smartphone sales beginning to decline, the shortage of DRAM turned into a glut and prices fell. When Micron reported its Q2 2019 earnings, DRAM prices had declined over 20% from the previous quarter and demand was down. As a result, its DRAM revenue dropped from $5.2 billion in Q2 2018 to $3.74 billion. DRAM demand is expected to recover -- remember it's a cyclical business -- but not until into 2020. MU Stock Hit by the Trade WarRoughly half of Micron's revenue comes from the Chinese market. The company said earlier this year that China's Huawei alone accounts for 13% of its annual revenue. As the trade war with China heats up, more of MU's revenue is at risk -- its DRAM gets more expensive for Chinese companies to buy, it's not allowed to sell at all to some, the Chinese government may push some customers to buy from non-U.S. suppliers and reduced demand in the U.S. for the final products further reduces demand for DRAM. As the trade war with China escalated in May, MU stock dropped nearly 25%. China's Changxin Memory a Long-Term Threat for Micron StockThe latest blow to Micron stock is again related to China. Last week the Nikkei Asian Review reported that China's Changxin Memory is on the verge of becoming the country's first mass-producer of DRAM.The company has invested $8 billion in a new chip plant, and is using a new design for its DRAM based on a bankrupt German chipmaker -- thus avoiding U.S. charges of intellectual property theft. Initial production is expected to be 10K wafers a month, which is a drop in the bucket compared to the 1.3 million wafers currently produced globally. However, when Changxin Memory ramps up production its output could add to the global DRAM glut, further lowering already depressed prices. And as a native Chinese producer of DRAM, it is positioning itself to replace America's Micron as a supplier for Chinese tech companies like Huawei.There's nothing but downside for MU stock in that news, which goes a long way toward explaining Friday's drop. As of this writing, Brad Moon did not hold a position in any of the aforementioned securities. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * The 7 Best Tech Stocks to Buy for the Second Half of 2019 * 7 Top-Rated Biotech Stocks to Invest In Today * 4 Semiconductor Stocks to Sell Compare Brokers The post Micron Stock Is in the Crosshairs As China Threatens Its DRAM Business appeared first on InvestorPlace.
We often see insiders buying up shares in companies that perform well over the long term. The flip side of that is...
U.S. stocks retreated on Friday, but certainly haven't cratered over the last few sessions. It looks like the stock market is simply digesting its big gains from last week. Will this weekend or next week carry increased risk? We'll see. Until then, let's look at a few top stock trades. Top Stock Trades for Tomorrow 1: Micron Click to EnlargeMicron (NASDAQ:MU) is under pressure like most memory and chipmakers on Friday. However, that follows very discouraging action from this week, after MU stock topped out near $36. Already it's down almost 10% from those levels.InvestorPlace - Stock Market News, Stock Advice & Trading TipsIf it loses Friday's lows, it could be a slippery slope for Micron. In that case, a drop down to $30 could be in the cards. * Chewy IPO: 14 Things for Investors to Know If semis and tech catch a bid next week, see that Micron can hurdle $34 and its 20-day moving average. Otherwise, this one looks risky on the long side, particularly with a percolating trade war. Top Stock Trades for Tomorrow 2: Barrick Gold Click to EnlargeGold has been doing well as investors worry about the global economy. As such, miners like Barrick Gold (NYSE:GOLD) have been doing well too.The recent rally has taken GOLD right into range resistance. Of course, it's possible that the stock is able to breakout. But I'd rather play the move after the fact than bet on it happening beforehand.If range resistance is in fact resistance, look for GOLD to pullback into its 20-day to 50-day moving average range, between $12.82 and $13.07. A breakout over $14 could trigger a larger move higher. Top Stock Trades for Tomorrow 3: Chewy Click to EnlargeChewy (NYSE:CHWY) made its public debut on Friday, erupting from its $22 IPO price and opening at $36. Here are 14 things to know about the company.Shares are not exactly reminiscent of Lyft (NASDAQ:LYFT), as they back off the opening level highs, but they do share some resemblance. Investors are now trying to figure out if this IPO is going to be an Uber (NYSE:UBER)/Lyft debacle, or a Zoom Video (NASDAQ:ZM)/Beyond Meat (NASDAQ:BYND) situation. Truth is, no one knows.Risk-taking speculators can take a flyer on CHWY, banking that higher prices are here to come. At the end of the day though, trading day-one IPOs is really just speculation. No one really knows which way it will go.Just know its range. Over the IPO open price of $36 and CHWY can run to its day-one highs near $41 and possibly higher. Below its day-one low and shares can move lower, although I'd be surprised to see it down to $22 anytime soon. Trading this close to the IPO date isn't for me. Top Stock Trades for Tomorrow 4: Semiconductor ETF Click to EnlargeThe VanEck Semiconductor ETF (NYSEARCA:SMH) is under pressure Friday, falling about 2.5% thanks to the earnings results from Broadcom (NASDAQ:AVGO). The latter beat earnings estimates, but provided a tepid outlook as the trade war continues to weigh on its business.While AVGO was the catalyst Friday, a whole host of stocks will drive the SMH going forward. Nvidia (NASDAQ:NVDA), Advanced Micro Devices (NASDAQ:AMD), Micron and others will all have an effect.As for the ETF, the 50-day promptly rejected the SMH, while the 20-day could do little to buoy the name. That leaves the 200-day -- which didn't help much last month -- and last month's lows near $97.50 as the must-hold spot.Below those lows opens the SMH to a drop to the sub-$93 area. On a rebound, we need to see the SMH's series of lower highs (purple arrows) cease and for the SMH to clear its 50-day moving average.Bottom line: Watch the 200-day and last month's lows if the decline continues. Watch the 50-day and $109 if the SMH rebounds. Top Stock Trades for Tomorrow 5: Preferred Shares ETF Click to EnlargeThe iShares Preferred Stock ETF (NYSEARCA:PFF) has been on fire. But could the run be coming to an end?Once the PFF reclaimed its 10-week moving average, it has been on absolute fire. That was in the last week of December, by the way. In any regard, multi-year channel resistance is up near $37, while the MACD and RSI (blue circles) are suggesting momentum could be topping out as the ETF flirts with an overbought condition. * 10 Stocks to Buy That Wall Street Expects to Soar for the Rest of 2019 That's not to say the PFF can't go to $37, $38 or even higher. Just that over the past few years, this resistance mark has generally kept a lid on the stock. Investors will likely keep buying on pullbacks into the 10-week moving average until it fails. If and when it does, a drop down toward channel support and the 50-week moving average could be in the cards.Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long AVGO and NVDA. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * 10 Stocks to Buy That Wall Street Expects to Soar for the Rest of 2019 * 7 Value Stocks That Are Flying Under the Radar * 6 Mouth-Watering Fast Food Stocks for Growth Investors Compare Brokers The post 5 Top Stock Trades for Monday: MU, CHWY, GOLD appeared first on InvestorPlace.
Broadcom (AVGO) presented their second quarter earnings on Thursday after market close, and the call, as described by CNBC's Jim Cramer, was "truly depressing."
A Bank of America Merrill Lynch analyst lowered his earnings estimates for Micron due to deteriorating memory prices but reaffirmed his Buy rating on the stock, saying the difficult chip environment is priced into the company’s current valuation.
Investing.com - Broadcom fell sharply Friday, sending chip stocks lower after the company delivered an ominous outlook and reported revenue that fell short of estimates.