Micron Technology, Inc. (MU): Positive Read Through on DRAM Offers Insight Into the Chip Giant Landscape

The past 12 months for semiconductor giant Micron Technology (NASDAQ:MU) have been defined by surging prices and blockbuster results. Particularly in the DRAM market, supply has fallen short of demand.

Investors might be skeptical about Micron’s continued strong performance, since the stock is flirting with a multiyear high in a frothy market. However, Needham analyst Rajvindra Gill, long-time fan of MU, remains bullish on the stock with a Strong Buy rating and price target of $76.

Investors who listened to Gill over the past year have made 22% on their Gill bets, according to TipRanks, a site that tracks and ranks analysts on their predictions. Gill is currently ranked #25 out of 4,777 analysts.

In a research note issued Thursday, Gill said that Dell’s recent quarterly earnings commentary reinforces his thesis of a new memory paradigm emerging:

“We believe that positive commentary coming out of Dell reiterates our belief that Micron’s heightened growth is not solely a function of short term supply/demand dynamics but rather due to an increasing demand for memory both via expanding markets but also through increasing densities. This morning on Dell’s quarterly earnings call Jeff Clarke, VP of Products and Operations, stated: “On the server side, we are in the longest protracted DRAM price increase that we’ve seen in the last 25 years. Combine that with the fact that we are putting more DRAM in a server today than we were last quarter, than we were a year ago, and you have a compounding effect…. For me it is encouraging that the average amount of DRAM going into our servers and the SSDs, the average SSD size going into our servers is increasing, tells me we are selling higher in the enterprise workload.”

The analyst concluded, “We believe strength isn’t solely short term in nature, rather that a new memory paradigm is emerging, namely memory is expected to experience a heightened, sustained demand in diverse end markets (dampening previous cycles) as we transition to a data economy.”

Wall Street tends to agree with the analyst’s confidence on the memory-chip maker, considering TipRanks analytics reveal MU as a Strong Buy. Out of 17 analysts polled in the last 3 months, 16 are bullish on Micron stock while only one remains sidelined. With a return potential of nearly 9%, the stock’s consensus target price stands at $60.31.


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