Micron Technology (NASDAQ: MU) is one of the world’s leading memory chipmakers.

Generally speaking, this is a highly commoditized sector that is pretty cyclical. But in recent years, both of these sticking points have loosened up considerably.

When I speak of a commoditized industry, I’m talking about the fact that competition has driven most of the pricing premium out of this particular market, so the only way to add to your margins is to sell more product.

It’s much like an agricultural or industrial commodity. For example, corn has a set price per bushel. It doesn’t really matter whether the corn is coming from Texas or Virginia or Iowa, it’s all going for that price, which reflects demand.

The farmers’ inputs determine their profit margin. Oil has different prices because oil has different grades — eg, heavy sour, intermediate, light sweet, etc — and each has to be refined more or less. Lighter, ‘sweeter’ grades need less refining so they’re more expensive in raw form.

Anyway, chip makers have to find ways to increase their margins to grow their businesses in slow markets. But in high-demand markets, like what we’re experiencing now with the mobility revolution, chip prices rise — or at least stabilize — and margins grow.

For the past couple years, prices have been stable to rising and that has helped MU because it is primarily focused on the memory chip market.

MU Stock and the Computer Market

The other aspect of this is the cyclical nature of the computer market. Traditionally, companies and consumers would buy computers and then wait a couple years or so before upgrading again. The trough in this spending would mean lean times for the industry, and that’s when chipmakers would be working hard on the next generation chips for the next buying wave.

But that cycle has been disrupted in recent years because of the growth of mobile technology.

Now, mobile phones, tablets and laptops have replaced workstations. Cloud computing has changed the need to have massive amounts of memory stored on devices, so smartphones are now as powerful as workstations of old.

This new paradigm has also lengthened the tail on the buying cycle for these new devices. Phones are replaced almost annually.

Add to this new spinoffs like the Internet of Things (IoT) where every electronic device can be networked to all the others. Smart cars and smart homes are two perfect examples of “dumb” machines becoming “smart.”

Then, with the cloud and Big Data comes increased demand from huge server farms that need to move massive amounts of data quickly and reliably.

All this requires the kind of memory technology that MU makes.

It’s also why MU stock is up 80% in the past year. But the most amazing thing is, while the stock continues to knock it out of the park, quarter after quarter, analysts remain cautious. Its current P/E is a mere 5.5. That’s a bargain.

But don’t tell anyone, at least until you’ve stocked up on shares.

Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.

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