Is Micron Technology stock a ‘Buy’ after recent upgrades?
On Monday, May 20th, Morgan Stanley upgraded Micron Technology (NASDAQ:MU) to Equal-weight from Underweight and significantly raised its price target from $98 to $130. This move reflects the firm’s reassessment of Micron’s potential, particularly in the context of high bandwidth memory (HBM) and the broader AI memory market. Despite concerns about valuation based on long-term discounted cash flow (DCF) metrics, Morgan Stanley acknowledges that Micron’s involvement in AI and memory technology narratives has become increasingly significant.
The firm’s analysts noted that while they still consider Micron overvalued in the long term, the near-term dynamics driven by HBM and NAND memory markets have prompted a more optimistic outlook. This upgrade follows other positive analyst actions in recent days, with analysts at Barclays boosting their price target on the stock to $145 from $120 on May 13th, maintaining an Overweight rating, and analysts at Mizuho increasing their price target on Micron to $150 from $130 on May 17th while reiterating a Buy rating.
These upgrades highlight a growing confidence in Micron’s business fundamentals and its strategic positioning within the rapidly evolving AI and semiconductor markets. Micron Technology, a leading provider of DRAM and NAND memory products, has been benefiting from the surge in demand for AI and data center applications. The company has seen significant gains in its stock price, nearly doubling over the past year, driven by robust demand for its advanced memory solutions.
Analysts have pointed out that Micron’s HBM3E offering, with its superior power efficiency, is likely to capture increased market share as AI technology becomes more prevalent. Additionally, the company’s diversification into SSDs and other storage solutions positions it well to capitalize on growth in multiple segments.
Fundamentally, Micron appears to be in a strong position. Despite a challenging period marked by revenue declines, the company has shown adaptability. Its financial health is bolstered by a solid balance sheet, with liquid assets exceeding short-term obligations and a moderate level of debt. Moreover, Micron’s commitment to returning value to shareholders through share repurchases and consistent dividend increases reflects confidence in its long-term prospects.
Valuation-wise, Micron appears attractively priced given its growth prospects. While the company’s forward P/E ratios might seem high due to the recent downturn, projections indicate that these ratios will contract significantly as earnings improve. This suggests that the market may currently undervalue Micron, especially considering its strategic position in the AI and data center markets.
Now, let’s see what the charts have to say. Examining the technical aspects of Micron’s stock can provide further insights into its potential future performance. Technical analysis can also help us understand the stock’s recent price movements, identify key support and resistance levels, and evaluate the stock’s momentum.
Bullish momentum shows no signs of slowing
Micron has been one of the best-performing technology stocks over the past few years. Between mid-2016 and mid-2018, the stock soared from $10 levels to above $60. After spending the next 2 years trading in a $30-$60 range, the stock again saw an uptrend which took it near $100 by April 2021. It twice tried to break above $98.5 resistance in 2021 and early 2022 but failed and crashed to $50 levels by the end of 2022.
MU stock by TradingView
However, since then bullish momentum has prevailed. The stock has seen strong upward momentum since November last year which has caused it to nearly double from $65 levels to $130 currently. As long as it continues to trade above its 50-day SMA expect it to continue marching upwards. Investors who have bought the stock over the past few months can continue holding it with a stop loss at $97.8. If it breaches that level and starts trading under it bears will be in control.
Traders who are bullish on the stock in the short term can initiate a long position once it gives a daily closing above $130.8 with a stop loss at $117.2 and a profit target of $164.6. Traders who are bearish on the stock must avoid shorting it at current levels as bulls are in complete control right now. They must initiate a short position only when the stock falls below $117.
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