Micron Technology: Struggling to Reach $50
In the weeks following its strong quarterly earnings report, Micron Technology (NASDAQ: MU) failed to sustain a meaningful rally. The stock price peak of $50 last Nov., 2017 is beyond reach. Pessimism over the memory and storage chip demand weighs on Micron and the industry.
Investors bearish on MU stock, where short float is 5.36% gained momentum when Samsung (OTCBB: SSNLF) reported record quarterly results on Jan. 9. The Korean conglomerate reported its highest-ever profits of $14.1 billion, up 64% year-over-year. But these results are below consensus forecasts. Micron’s stock will trade in the single-digit P/E of below 7 (and a forward P/E of 5 times) as long as strong prices and limited supply attracts more suppliers entering the market.
For now, Samsung capped output and competitors are not flooding the market with excess DRAM and NAND. So, markets are being irrational in fearing the worst. This creates an opportunity for value investors to continue accumulating MU stock. Micron forecast strong revenue ahead. Astute investors may assume with confidence that management knows better than the everyday investor.
Intel / Micron Split a headwind
Unfortunately, Micron splitting from Intel on 3D xPoint is a negative development. Analysts at Needham defended the split but chances are going up that the competition will hurt NAND pricing. Still, the near-term prospects are positive for Micron. NAND bit growth of 50% will coincide with a drop in bit costs of around 25-30%.