Now that Micron Technology (NASDAQ:MU) is trending back to the low $40 level, markets are pricing in a slow but meaningful second half recovery in the chip sector. Analysts have a mixed outlook on Micron with one analyst bullish and two publishing caution on the stock. Who is right?
RBC wrote that it expects a bottoming for a non-smartphone Apple ramp up in the second half of the year. Hyperscaling at the data center would drive memory demand higher. Longbow had a different view. It pointed to low memory pricing power last month in March as a problem. That weak pricing continued into this month.
At a P/E of 4 times, markets are not rewarding the stock’s past growth. It is fairly pricing moderate growth ahead. Micron just needs NAND demand strength accelerating and supplies shrinking. The same is needed for DRAM: price stabilization and higher demand for the rest of the year would lift both profits and Micron profit margin.
Takeaway
MU stock is still for traders. A rally may stall at the 200 day moving average at $43 - $45. Consider selling the stock at $45 - $50 to lock in gains.
