A strong outlook from Micron Technology (NASDAQ: MU) in its June quarter report is not having a strong enough impact on bullish investors. After peaking several times at the $60 range, MU stock is starting to lose steam again. Markets are instead pricing in the risks of an escalating trade war between the U.S. and China. The imposition of higher tariff on more goods is a real threat to the world economy. It is especially damaging for semiconductor stocks.
Micron’s 5.6x P/E (4.7x forward P/E) should grab the attention of value investors. When Taiwan Semiconductor (NYSE: TSM) bottomed at $35.34 and rallied back to nearly the $41 mark, Micron’s stock should have rallied, too. TSMC’s positive outlook for the smartphone market removes the bearish thesis on the stock. Investors may have decided to bet on the bullish prospects for suppliers in the smartphone market instead of Micron’s market. At a P/E in the mid-teens (15 – 17x), TSMC is relying on strong Apple (NASDAQ: AAPL) iPhone sales.
The value investor should consider Micron, Applied Materials (NASDAQ: AMAT) and Lam Research (NASDAQ: LRCX) due to their favorable stock price relative to positive prospects. When their outlook is just as positive, they may rally as nicely as that of TSMC stock.
