When I last weighed in on Micron Technology (NYSE:MU), I noted the “stock should also see a boost from 5G. This is due to demand for its dynamic random access memory chips (DRAMs) and NAND flash storage. Remember, when it comes to 5G, every device will require a combination of both DRAM and NAND memory.”
That was on Dec. 13, when MU stock traded around $51. By Jan. 6, shares were up to $58.
Year over year, Micron stock is now up 77%, as compared to the Van Eck Vector Semiconductor ETF (NYSE:SMH) – up 61% year over year. The iShares Trust S&P Semiconductor Index Fund (NASDAQ:SOXX) was up 56%.
From here, I strongly believe MU could test $65 a share, especially with the 5G boom and a recent upgrade from a Cowen analyst.
5G Fueling a Monster Rally for MU
Thanks to the 5G boom and an upgrade from Cowen analyst Karl Ackerman, (who just hiked his rating to “outperform” with a price target of $70 a share), MU has been one of the most explosive semiconductor stocks to own.
“Our field work indicates DRAM fundamentals may improve earlier than expected on an improvement in server and smartphone demand,” said Ackerman. “Coupled with MU’s improved cost position vs. peers, we see profitability scaling from here.”
Ackerman also noted that the new 5G phones will use 50% more memory than current phones – with the smartphone industry representing about 40% of DRAM memory demand, he added.
Motley Fool contributor Anders Bylund said much of the same in early Nov. 2019, noting smartphones in 2020 will need “at least 50% more memory than their 4G cousins.”
Rosenblatt analyst Hans Mosesmann has a “buy” rating on MU stock with a $100 price target, noting, “Micron is clearly a better company in virtually all dimensions, with a richer/stickier product stack, a model that is delivering 50% FCF to investors.”
Micron Called a Bottom in Memory Chip Demand
Analysts and Micron executives are also seeing big signs of improvement in the memory chip industry post-inventory glut. While the company just posted its fourth quarter of declining sales and earnings, with 48 cents on sales of $5.14 billion (which topped estimates), the company believes a recovery will materialize in the fiscal third quarter.
“With our strong execution and improving industry conditions, we are optimistic that Micron’s fiscal second quarter will be the cyclical bottom for our financial performance,” Micron president and chief executive Sanjay Mehrotra said.
The Bottom Line on MU Stock
With the 5G boom upon us, coupled with potential smartphone demand, MU is one of the top semiconductor stocks to buy and hold. Plus, with analysts bullish and the company calling for a recovery by third quarter 2020, I strongly believe MU stock will reach $65 shortly.
As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.