3 Reasons to Ride the Micron Technology, Inc. Stock Wave Higher

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micron stock - 3 Reasons to Ride the Micron Technology, Inc. Stock Wave Higher

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It’s been a pretty awesome 2018 for Micron Technology, Inc. (NASDAQ:MU). Micron stock holders have seen their shares gain 44% so far in 2018 and the past week alone has boosted the share price by more than 10%.

Watching a rally like this from the sidelines can be a bit disheartening, but the question is whether or not MU will keep rising or if potential investors should wait for a pullback before jumping on board.

The Micron Stock Risk

Micron makes a range of memory technologies that have become integral parts of some of the hottest tech trends so the company benefits from a great deal of demand.

However, this type of tech tends to behave like a commodity and has a cyclical demand cycle- so at some point, analysts expect supply to outpace demand and push prices lower for a period.

So far, MU has been enjoying high-demand for its products giving the firm a lot of pricing power but many believe that a lull is on the horizon and with it, a pullback for Micron stock.

Competitor Samsung has started to mass-produce its GDDR6 memory technology- something that could cause an oversupply issue in the industry.

The company is also working with China’s National Development and Reform Commission to moderate prices on memory technology by leveling supply and demand. That could be a scary thought for Micron stock investors.

Don’t Sweat It

Yes, there’s a supply and demand risk for Micron on the horizon, but the firm looks well positioned to deal with it effectively. Micron has worked to stretch its offerings into several fast-growing tech industries like Artificial Intelligence, security and autonomous driving.

The only way to avoid the pitfalls of an oversupply issue is to create products that customers can’t get anywhere else and Micron is doing just that. The company created a chip that offers memory bandwidth speeds of more than 800 gigabytes per second- something that none of its rivals have been capable of thus far.

Still Cheap

Another big reason you shouldn’t overlook Micron stock just because of its recent rally is the fact that MU’s stock price today still isn’t that expensive. The firm’s P/E ratio comes in at just 9.36- a far cry from the industry average of 40.38.

It’s one of the cheapest memory chip makers you can get right now, and the company looks to have a bright future. Earnings are seen growing steadily each year for the next 5- making it a good addition to a long-term portfolio.

Riding Higher

Micron is due to report its second quarter earnings next week and if analysts are correct, the announcement will likely set the stock up for a run even higher. Some are even comparing what’s happening in the memory technology space to what happened for graphics card maker Nvidia Corporation (NASDAQ:NVDA).

Of course, with so much anticipation comes a risk factor- there’s a chance Micron stock won’t dazzle with its upcoming earnings and investors will sell on the bad news. However that chance looks slim at the moment.

Takeover Talks

I’d never buy a stock purely on takeover speculation, but it’s worth mentioning that there’s been a lot of M&A chatter surrounding MU in recent days. Chipmaker Broadcom Ltd (NASDAQ:AVGO) was due to acquire Qualcomm, Inc. (NASDAQ:QCOM), but the Trump administration blocked the deal.

Many are wondering if QCOM will turn its sights on Micron in the wake of the failed deal, which is a definite possibility. Although there’s a chance that such a deal would also be frowned upon by regulators and ultimately blocked once again.

The Bottom Line

Micron has a lot of momentum right now and there’s little reason to expect that momentum to subside anytime soon. If MU is on its way to becoming the next NVDA, it would be a shame to continue to wait on the sidelines, but even if it’s bull run isn’t quite that dramatic.

Micron stock looks like a great long-term bet that will deliver solid gains for the next 5 years as the market for memory chips continues to grow alongside tech mega-trends like AI and autonomous driving.

As of this writing, Laura Hoy was long MU. 

Marie Brodbeck has a Finance degree from Duquesne University and has been a financial journalist for more than a decade. Her work can be seen in a variety of publications including InvestorPlace, Benzinga, Yahoo Finance and CCN.


Article printed from InvestorPlace Media, https://investorplace.com/2018/03/micron-stock-wave-higher/.

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