Investors should look at the semiconductor sector as a leading indicator of the health of technology stocks. So, when Micron (NASDAQ:MU) lifted its third-quarter revenue outlook in late May, chances are good that the stock will keep going up.
Micron forecast revenue in the range of $5.2B - $5.4B, up from the prior $4.6B - $5.2B. Given the company’s history of issuing conservative guidance, it may beat expectations when it reports later this summer. The higher guidance in the face of the coronavirus pandemic demonstrates how healthy the business is ahead. In general, other firms failed to issue an outlook.
Micron is potentially benefiting from both secular trends and pent-up demand from Chinese customers due to the U.S.-China trading issues. Globally, stronger demand for laptops and PCs, as well as the cloud and data center market was likely offset by the mobile and automotive markets.
Risks
The banning of chip sales to Huawei globally may hurt chip demand in the future. If this Chinese firm stockpiled chips, then Micron’s pace of sales may slow after this quarter. Still, MU stock is trading in the low 10 times forward P/E range. Sustained growth in sales will send the stock higher to the $60 - $75 range within a year.
