Bank of America’s upgrade of Micron Technology, Inc. (NASDAQ:MU) looks late. The firm raised its target price from $11.50 to $35 a share. At a recent price of $24 a share, Micron stock is still cheap at a forward price-to-earnings ratio of 8. The $35 target price is possible, but investors may want to wait until after the quarterly earnings report before they buy MU stock.

According to BAC Merrill Lynch, Micron stock is facing less competition from Japanese firms, notably Toshiba (OTCMKTS:TOSBF) and Tsinghua Unigroup. It believes MU’s higher free cash flow is supported by the Inotera unit.

Micron Stock’s Upside Case

The forecast of higher unit prices is a legitimate expectation. Supply for DDR memory and NAND (used in solid state drive) is tight. DDR3 demand strengthened last quarter while demand for DDR4 solutions grew thanks to the cloud segment. Thanks to a ramp up in graphics cards makers like Nvidia Corporation (NASDAQ:NVDA), GDDR demand is strengthening. On its conference call last December, Micron said:

We executed well to our 20 nanometer shipment plan and achieved key qualifications of 64 gigabyte LRDIMMs at multiple server customers. We also continued our strong performance in the graphic segment, where our GDDR5X Technology leads competitors.

All of this good news suggests that MU stock will continue its uptrend, ever since it bottomed at $9.35 last year. Still, investors have plenty of time to add more Micron shares ahead of the quarterly report, which is expected on March 22 after the market closes. Last December, MU stock jumped after the company reported fiscal first-year results.

MU Stock Risk

Micron stock is no different from other semiconductor stocks. Its profitability comes in cycles. For MU, the bullish cycle started last fall, when it became clear the company would benefit from stable DDR memory prices.

Solid State drive prices are falling steadily, creating an incentive for PC users to upgrade from mechanical hard disks made by Western Digital Corp (NASDAQ:WDC) and Seagate Technology PLC (NASDAQ:STX). WDC and STX shares trade at an 8.5x and 10.4x forward P/E, respectively. Although WDC stock is slipping in recent days on profit taking, Micron stock may hold up if it reports another blowout quarter.

BAC correctly anticipates less competition from Toshiba, since it is looking for a buyer for its chip business. If MU buys the unit, it would consolidate pricing and supply, strengthening the company. Yet at a 0.79x debt-to-equity ratio stemming from its Inotera acquisition, Micron may take a pass at buying the unit. If WDC buys the Toshiba chip unit, the deal should not have a negative impact on Micron. Toshiba’s flash memory business is a better fit for Western Digital than it is for Micron.

Bottom Line on MU

Higher sales for Micron’s 3dxpoint, DDR and NAND will restore the company’s positive earnings in 2017 and beyond. Earnings-per-share of around $3.00 by 2019 and a 10x forward multiple would imply a stock price of at least $30 a share.

Micron is in a memory “super cycle” that will propel the stock to new highs. $30 a share is a conservative price target for MU stock in 2017. More upside will follow if chip prices hold and competitors do not flood the market with supply. In that case, the stock price could conceivably trade at $40 a share, or 13x 2018 EPS of $3.00 a share.

As of this writing, Chris Lau did not hold a position in any of the aforementioned securities.