Micron Technology, Inc. (NASDAQ:MU) is wafting up 2.3% this morning after a slew of price target upgrades, bringing the robust gains in MU stock up to nearly 20% this year.
The most recent surge in Micron stock began late last week on comments by Hewlett-Packard Enterprise Co (NYSE:HPE) suggesting the DRAM density in mobile would likely double. Micron takes in about 60% of its revenues from DRAM, so that’s huge for MU.
Whereas Micron’s rivals are hitting peak capacity in the DRAM market, Micron has the flexibility to take on increased market demand.
That news prompted Nomura Securities analyst Romit Shah to raise the price target on MU stock to $20 from $16:
“Amid a recovery in DRAM, we are taking an in-depth look at normalized operating margin, which strongly correlates (R squared 0.9) with price-to-book. Our analysis indicates fair value of $20 per share based on operating margin of 10%. While Micron has the lowest margins in the group, the company per our estimation also has potential to boost margins sustainably above its historical median.”
Shares of Micron continued their gains Friday (albeit much smaller than Thursday’s gains) and are continuing to fly high after Monday’s upgrade from Stifel. The firm expects MU stock to hit $18 a share (up from $15) and have reiterated their “buy” rating on the stock.
What’s more, Deutsche Bank also raised its price target on Micron stock to $20 from $15. According to Deutsche analyst Sidney Ho, the balance between supply and demand is now tipped more positively in Micron’s favor.
Ho attributes the robust DRAM market to an “encouraging turnaround”:
“Amid these tailwinds, MU also seems to be executing well on its product roadmaps, driving more competitive cost structure and allowing it to regain share. This momentum is set to continue in 4Q and we believe the current supply tightness will moderate the seasonal softness for DRAM pricing in 1H17. Consequently, we raise our EPS estimates and move our PT to $20.”
August has been gangbusters for MU stock holders, as Micron shares are up 23% in the past month. Over the past three months? Nearly 40%.
Today, Micron surged 4% in response to the upgrades before cooling off.
As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.
