Micron (MU) is ready for 2019.
After surging 40% in the first half of the year, the stock is down 50% from its 52-week high and 30% overall for the year. Micron plays in a very cyclical business, which means performance can change on a dime — in either direction. Strong demand that was pushing the stock up in the beginning of the year has waned, while supply has increased and pushed average selling prices downward. All of this has contributed to investor uncertainty in the industry and company. That said, Seeking Alpha’s blogger Jeffery Margolf says investors should not panic and remains bullish on the stock.
Margolf believes advances in consumer technology will be “lackluster or indistinguishable” over the next decade as we “get closer to the end of Moore’s Law.” As a result, he says it will become “increasingly more expensive and difficult [for Micron and other industry companies] to procure more advanced chips, straining supply and ultimately enhancing prices.” As chips become less marginally improved, there could be strong demand for previous models, which may hurt revenue for new models.
But Margolf says investors should not panic: “With the continued proliferation of AI and IoT, along with further data server integration to meet the needs of cloud-based computing, long-term memory needs are here to stay. There’s an overarching theme for the 21st century: Big data. If you believe in the large behemoths to continue disrupting the world we live in – e.g., Google (GOOGL), Amazon (AMZN), Facebook (FB), Netflix (NFLX), Apple (AAPL), do I need to continue? Then you should believe in the companies that will meet their storage (hardware) needs.” Essentially, the writer is saying even as one part of the technology world may grow slowly, there are many other parts that are rapidly increasing their use and need of memory chips and therefore will contribute to Micron revenue in the years to come.
Analysts are concerned about short-term challenges in the components market but like Margolf, most are bullish over Micron’s long-term potential. TipRanks analysis of 26 analyst ratings on Micron shows a consensus Moderate Buy rating and an average price target with a 50% upside to current levels. Of the 26 analysts, 15 analysts recommend Buy, ten recommend Hold and only one recommends Sell. (See MU’s price targets and analyst ratings on TipRanks)