The good times just keep rolling for chip-maker Micron Technology, Inc. (NASDAQ:MU).

MU stock has now climbed from $10 in early 2016 to $45 today. The big run has been fueled by a favorable limited supply, big demand dynamic in the DRAM market, which has led to a surge in revenues and profits.

When I say surge, I mean surge. Revenues went from $12.4 billion in fiscal 2016 to $20.3 billion in fiscal 2017. More impressively, MU turned a $276 million net loss in 2016 into a $5.1 billion net profit in 2017.

But this is a cyclical industry. When the times are good (like they are today), one of the major suppliers boosts capacity to either maintain or grow market share. That brings product prices down, eats away at margins, and just like that, MU’s $5.1 billion in profits are gone.

Are we at the top of the cycle? Close, but not there yet. Consequently, MU stock should keep grinding higher. I think $50 is a good level to watch for this name.

Here’s how I get there.

Good Times Keep Rolling for MU Stock

Things are on fire right now in the DRAM market.

The supply-demand dynamics in the global DRAM market remained favorable in the third quarter of 2017. Revenue was up 16% sequentially and hit a record high. Contract prices rose 5% due to booming demand on top of limited supply. That is key, because it implies higher profit margins for MU.

Those favorable supply-demand dynamics will actually grow more favorable in the fourth quarter, thanks to booming mobile demand. Going into the fourth quarter, the DRAM market is one of limited supply amid some headline smartphone launches. That gives suppliers big pricing power.

Samsung Electronics Co Ltd is already raising the quotes of its mobile DRAM products. Because of this, mobile DRAM prices could rise between 10% and 20% in the fourth quarter. That robust growth will lead to overall DRAM price growth of around 10%, estimates DRAMeXchange.

Because of this exceptionally favorable supply-dynamic heading into the fourth quarter of calendar 2017, now seems like a good time to own MU stock. This might be one of the best quarters for MU in company history.

But the Peak Is Near for MU Stock

But that record quarter won’t be the new normal.

It certainly appears as though we are nearing peak cycle in the DRAM market. Samsung is reportedly shifting from a technology migration focus in 2017 to a capacity expansion focus in 2018 in order to preserve its dominant market share. New product will flood into the market, causing the current limited supply situation to be less favorable into the foreseeable future.

But demand will remain big. Demand from mobile, Internet-of-Things (IoT), AI, and data-center markets will remain robust.

Big demand on less limited supply implies earnings compression, but not an earnings wipe-out. Overall, the Street thinks earnings will hit $6.20 in fiscal 2020, versus $7.80 in fiscal 2018.

MU stock has traded around 13x forward earnings in the past, but that forward multiple has fluctuated significantly based on the supply-demand situation. It looks like the market is comfortable paying 11x forward earnings for MU stock when earnings appear stable, as they should be by 2020.

An 11x forward multiple on $6.20 fiscal 2020 estimates implies a fiscal 2019 price target of $68. Discount that back by 15% per year, and you get to a present value of over $50.

Bottom Line on MU Stock

MU stock is a good one to own here amid what will be a record quarter due to huge mobile demand against a limited supply backdrop.

Peak earnings are just around the corner, so that is something to be aware of. But due to chip complexity and robust demand, supply increases won’t cause an earnings wipe-out. Earnings will come down, but the declines should be moderate.

Consequently, I like MU stock in the $40 range. Fundamentals imply it should be north of $50.

As of this writing, Luke Lango was long MU.