Markets finally recognize the deep value in shares of Micron Technology, Inc. (NASDAQ: MU). The semiconductor supplier trades at a forward P/E of 6 times. But new leadership, along with strong demand for DRAM, will keep the stock price above $30 a share.
Micron’s new CEO, Sanjay Mehrotra, could lead the company towards a prosperous future. The CEO worked previously at SanDisk, before Western Digital (NASDAQ: WDC) bought it. With Micron’s tremendously strong cash flow growth in the quarters ahead, the company may make strategic acquisitions that integrate DRAM chips and other parts Micron supplies to a more complete product.
Micron’s current catalyst is the high DRAM prices. Thanks to Samsung and Hynix moving capacity from DRAM to NAND helped lift prices. As SSD demand grows, NAND demand will, too. That suggests DRAM supply will not exceed demand any time soon. Demand for memory will only increase as sales of smartphones having lots of memory (at least 3GB) grow steadily.
Looking ahead, Micron is shifting its production from 20nm to 16nm. That will help Micron regain market share. 3D NAND and Xpoint are two new products that have yet to prove itself. Chances are good that the markets will receive them well. When that happens, look for markets to reward Micron shareholders.
