After toying with the sub-$45 between Dec. 2017 and Feb 2018, Micron Technology (NASDAQ: MU) finally broke out to trade to the mid-$50’s on no news. Micron’s valuations are the only positive catalysts explaining the newly found bullishness. With the short float at just 5.7%, a P/E in the 8 – 9 range, a forward P/E of 6 times, will Micron need more than low valuations to justify more upside?
Micron’s fundamental are very solid. DDR3, the last-generation of memory, still commands high prices. DDR4, today’s generation of memory, also has favorable pricing dynamics. The price-per-GB rose from $0.66 in Jan. 2017 to $0.97 by Jan. 2018. Supplies for memory are growing, but nowhere near the pace needed to meet strong demand.
The desktop PC refresh is hardly a positive catalyst for higher memory prices. Server memory demand is part of the reason for strong demand but the biggest reason for a supply shortage is smartphones. The latest refresh from the top manufacturers like Apple (NASDAQ: AAPL) and its iPhone and Samsung (OTCBB: SSNLF) requires plenty of memory.
Unless Samsung wants to take more market share than it has now through higher output, supplies will remain constrained. All memory suppliers will therefore benefit with the fat profit margins, including Applied Memory (NASDAQ: AMAT) and LAM Research (NASDAQ: LRCX).
Tech Insider
