Shares of Micron Technology, Inc. (NASDAQ:MU) have have lost some steam over the past couple of weeks, falling more than 6% since MU stock reached a 52-week high of $25.31 on Feb. 2. Even with this modest correction, Micron stock has given its shareholders plenty to be excited about. As for investors who have waited on the sidelines, now’s your chance.
Micron stock, which currently trades hands around $23.65, has a clear shot to reach $30 per share in the next 12 to 18 months.
Although the company has faced some headwinds in the memory chip business, particularly due to a supply glut in the DRAM and NAND chips market, Micron has made the best out of a bad situation. In the most recent quarter, Micron posted adjusted earnings of 32 cents per share, which not only beat Street estimates by 4 cents, it reversed a loss of 5 cents in the previous quarter.
Likewise, revenue came in at $3.97 billion, surging 19% year over year and 23% sequentially. These results, which suggests Micron has begun to take share from its competitors like Samsung Electronics (OTCMKTS:SSNLF), Toshiba Corp NPV (OTCMKTS:TOSBF) and Western Digital Corp (NASDAQ:WDC).
As such, Micron has now forced analysts to become more bullish about its growth prospects and that of MU stock, despite the headwinds in the industry. And the company’s guidance affirmed this.
For the second quarter, MU forecasts earnings between 58 cents and 68 cents on revenue ranging between $4.35 billion and $4.7 billion, topping analysts’ estimates of 39 cents per share on a revenue of $3.91 billion. And this level of confidence makes MU stock one of the better bargains in the space, particularly on the back of potentially higher DRAM prices.
There’s also the potential growth catalyst from its Inotera acquisition to be excited about. The $4 billion deal for the Taiwan-based DRAM supplier, which closed in December, is expected to be immediately accretive not only to DRAM gross margins, but also earnings per share and free cash flow.
Sure, there will be some execution risk tied to integrating Inotera. But given the string of earnings beats and the Micron’s upbeat guidance, the management has basically assured the rewards far outweigh those risks.
Bottom Line on Micron Stock
With Micron stock still priced attractively at a forward price-earnings of 8, which is about ten points below the S&P 500, you would be hard-pressed to find another stock offering the combination of growth and value.
Assuming Micron can achieve higher gross margins, combined with favorable DRAM pricing, these shares can reach $30 in the next 12 months, delivering 30% returns.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.