Micron (MU) stock is suffering a bit in the market right now, falling 6% year-to-date. Though the share price rose in 2017 when there was a shortage of both NAND and DRAM, a wider stock market hit is responsible for the fall of company stocks like MU. Nevertheless, Seeking Alpha blogger George Kesarios says there’s a reason Micron remains his top pick for 2019. (To watch Kesario’s track record, click here)
Firstly, Kesarios explains MU has longevity and the potential to swing up in 2019: “The stock has always been a proxy for memory prices, and since memory prices are forecast to fall, it means the market is pricing in today, a huge EPS and revenue decline in the future,” Kesarios continues, “Revenue and EPS will need to decline in order for the stock to become expensive. Outside of everyone saying it on CNBC, I do not see analysts, the market, or the company forecasting such a decline.”
“Unit sales will increase, and over time the world will use more memory, not less,” Kesarios asserts. “Even assuming zero revenue growth and flat EPS for the next two years, Micron shares will still provide above average returns.”
Reports from the industry seem to have a more gray outlook for 2019. Dramexchange.com anticipates DRAM prices to drop by 15 – 20% in 2019 due to a weak price trend for DRAM, and sees a 25 – 30% drop due to an increased supply of NAND flash memory. Additionally, Samsung suggests memory prices will be weak in Q4, showing a decline in EPS due to weak demand for memory chips due to seasonality, but that business conditions will then strengthen in 2019. Kesarios sees this as a pro, believing prices for Q119 are at a, as he says, “fundamental bottom,” meaning the memory market (in general) is currently undervalued, leaving opportunity for prices to increase down the line.
Kesarios goes on to say the stock could rise to $150 per share in the future. “Micron is on my top pick for 2019. On the one hand its stock is currently trading at a very depressed multiple, and on the other, if I am right, investors might get a multi-bagger return over the next 2-3 years,” Kesarios concludes.
Most analysts who remember to check in on Micron, rate the stock a Moderate Buy. Out of 25 analysts who have rated the stock in the last three months, 17 are bullish and 8 are sidelined. The consensus price target stands at $63.52, which shows a 67.82% upside from where Micron shares are currently trading. (See MU’s price targets and analyst ratings on TipRanks)