Top Analyst Pulls the Trigger on Micron (MU)


Is it time to buy Micron (NASDAQ:MU) stock? RBC Capital’s top analyst Amit Daryanani thinks so. The analyst initiated coverage on the chip giant with an Outperform rating and an $80 price target, which represents a potential upside of 47% from where the stock is currently trading. Daryanani becomes the nineteenth analyst to recommend investors buy the stock.

Why? Daryanani believes Micron represents a unique opportunity for investors to gain exposure to DRAM and NAND markets at what he views as attractive valuations.

Daryanani wrote, “We do not believe that memory cycles are over, but we think that cycles will be less volatile and less severe going forward. We do think near-term cycle fears are clouding investors’ view of secular tailwinds in both the DRAM and NAND markets. The memory industry has consolidated significantly and grown capacity in a disciplined manner. Furthermore, memory’s correlation to PC cycles has declined, and both NAND and DRAM have incremental secular demand drivers in a world where data is growing exponentially. In addition, longer-term inflection technologies from AI to smart cars would create an explosive amount of data, creating a sustained memory demand.”

“Micron’s P/E multiple has been volatile to say the least, and the stock is presently trading at sub-5x levels, well below the median ~9x, and at levels that are low even for peak earnings. While bears might argue (though debatable) that MU earnings are near peak, we note that the last cycle (2014–16), which was relatively benign, saw the multiple at ~7x levels around earnings. In addition, we think that MU is not getting credit for a much stronger balance sheet this cycle. Finally, as Micron initiates a shareholder return program, we think its multiple would improve 1–2x turns depending on the magnitude. This leads us to believe that a 10x multiple is more appropriate for MU,” Daryanani continued.

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, 5-star analyst Amit Daryanani has a yearly average return of 27.7% and a 85% success rate. Daryanani has a -3.1% average return when recommending MU, and is ranked #13 out of 4801 analysts.

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