As long as there are skittish retail traders who react to each little bit of news, portfolios will churn and newbies will get burned. But you don’t have to be a victim of FUD (fear, uncertainty, and doubt) if you’re holding Micron (NASDAQ:MU) stock; those who own MU stock have invested in a solid performer with a strong future.
I’ve seen some folks on social media recommend shorting MU stock, and they’re all entitled to their opinions. Still, I’m not planning on selling my positions; trade war or no trade war, MU stock is a long-term winner with plenty of gains in its future.
Goldman Made the Right Call on MU Stock
I’m not one to blindly follow the lead of analysts, but sometimes their assessments are spot-on. Such is the case, I believe, with Mark Delaney, a Goldman Sachs analyst who recently upgraded Micron stock from a “neutral” rating to a “buy” rating.
Delaney also increased his price objective on MU stock substantially. from $40 (which I thought was unreasonably low) to a much more optimistic $56. Evidently this analyst is increasingly bullish on semiconductor stocks generally, suggesting that Goldman is taking a more favorable stance on chip makers due to a supply shortage. Delaney wrote:
We are now more positive on global memory stocks as we believe that the excess inventory memory companies are carrying will be depleted faster than our previous expectations, primarily in NAND flash as a result of the Toshiba (OTC:TOSBF) Memory Corporation (TMC) fab outage that has disrupted a mid single digit percent of annual industry production (and to a lesser extent incremental capex/utilization cuts).
MU’s Earnings and Revenues Are Looking Solid
If Micron’s fiscal Q3 results are any indication of its health as a company and of the attractiveness of MU stock as an investment, then trade-war worries are nothing more than a distraction for Micron stock.
The numbers bear out that thesis, as MU’s actual earnings per share came in at $1.05, compared to analysts’ average projection of just 79 cents, Its revenue came in at a very impressive $4.79 billion compared to analysts’ average expectation of only $4.69 billion.
This all took place during some of the most heated flash points of the U.S.-China trade war; bear in mind that Huawei was responsible for 13% of Micron’s revenue during the first half of fiscal 2019.
According to Micron Chief Financial Officer David Zinsner, Micron “would have come in at the high end of its revenue guidance” if it weren’t for the financial burden of the Huawei trade restrictions.
Could the Trade War Actually Boost MU Stock?
While some social-media gurus have expressed their concern that the ongoing tariff war could take its toll on the MU stock price, Joseph Moore, a Morgan Stanley analyst, actually sees a silver lining to the international wrangling for Micron stock. Increasing his price objective for Micron stock from (a ridiculously low, in my estimation) $31 to a more logical $48, Moore was almost apologetic about his previous pessimism:
[G]lobal trade tensions and potential supply risks are driving shorter-term inventory accumulation, which makes our previous underweight rating less actionable.
Apparently, Moore doesn’t view trade tensions as a reason to run for cover anymore, and I couldn’t agree more. He even conceded that (MU’s) “earnings are bottoming out” (a rather odd characterization, considering Micron’s amazing earnings performance in Q3) and changed his rating on MU stock from “underweight” to “equal-weight” (still not as positive as I’d rate it, but maybe I’m asking for too much from these stodgy big-bank analysts).
The Takeaway on Micron Stock
Like other semiconductor stocks, MU has backtracked somewhat from its recent highs and might even be considered oversold in the short-term. Therefore, I don’t see any need to take profits on Micron stock; let the trade war rage on, as MU shareholders will prevail in the end.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.