This Top Analyst Goes from Bearish to Bullish on Micron Technology, Inc. (MU); Here’s Why

Needham top analyst Rajvindra Gill is throwing a bullish parade for Micron Technology, Inc. (NASDAQ:MU) in a recent research report, upgrading in a major leap from an Underperform rating to a Buy rating on shares of MU. Additionally, the analyst boosts the price target from NA to $33, which implies a close to 44% upside from where the stock is currently trading.

Gill asserts, “We believe MU has regained its customer positioning in 20nm, is successfully migrating to 3D NAND (2nd gen 64-layer) and is benefiting from a substantially better pricing environment in DRAM. The key question is: Are we returning back to the 2014 cycle where GMs peaked at 35.8% and the stock hit $36.50? We think so. Unlike in ’14, DRAM products are targeting more than just PCs — cloud computing, data centers, networking, graphics and auto/ADAS. Demand for DRAM is expected to grow 20-25% Y/Y vs supply growth of 15-20%.”

The chip giant gave investors cause to cheer with a “significant beat and raise” with its first fiscal quarter results for 2017, from revenue on a 23% quarter-over-quarter rise to $3.97 billion, outclassing consensus of $3.95 billion, to non-GAAP EPS of $0.32 that solidly topped the consensus forecast of $0.26. The analyst attributes the revenue to a surge in both DRAM volume of 18% as well as NAND of 26% coupled with a 5% rise in DRAM’s ASP. GMs hit 26%, also outperforming consensus of 25.2%, thanks to “a strengthening NAND and DRAM demand environment.”

“On the NAND side, demand has seen a huge increase (40-45% demand bit growth) fueled by adoption of enterprise SSDs and mobile storage. With cost conversions underway both in DRAM and 3D NAND, we think MU could approach GMs of ~36% late-CY17 and see earnings of $3.30,” Gill concludes, believing 2017 could be the year the giant beats its prime back in 2014. Ultimately, Gill is encouraged, with newfound confidence that all signs point positively for the stock.

As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, top five-star analyst Rajvindra Gill has achieved a ranking of #73 out of 4,295 analysts. Gill upholds a 60% success rate and realizes 14.1% in his annual returns. However, when recommending MU, Gill loses 34.0% in average profits on the stock.

TipRanks analytics indicate MU as a Strong Buy. Based on 24 analysts polled by TipRanks in the last 3 months, 21 rate a Buy on Micron, 2 remain sidelined, and 1 is bearish on the stock. The 12-month average price target stands at $25.14, marking a 9% upside from where the shares last closed.