5G’s Significant Memory Content a Key Growth Driver for Micron, Says 5-Star Analyst

Don’t fret if your smartphone is running out of memory, 5G is coming and will significantly expand capacity even for those on a budget.

5-star Needham analyst Rajvindra Gill reminds investors that chipmaker Micron’s (MU) quality components will be the ones enabling the handsets to do so.

Indeed, the upcoming 5G cycle is set to benefit Micron, as 5G capabilities will drive demand for NAND (Storage) and DRAM (memory).

Micron forecasts global sales of 450 million 5G handsets in 2021 and sees DRAM growing at a 15% CAGR from 2019-2022, with NAND bits increasing by 30%. The chipmaker expects handset unit sales to grow each year from 2021-2024. The trend is already on the up in China, with recent data indicating 5G phones made up 40% of mobile phones sold in China in April.

5G’s ability to handle masses of data will impact the whole spectrum of smartphones, from budget to high end. Flagship Android phones will be able to take 100-megapixel photos and shoot 8K videos. Gaming levels will match those of desktops.

Gill noted, “We expect MU to benefit from the recovery in the memory cycle, which we believe has exited a super-cycle and is now in a more typical cycle. We expect MU’s top and bottom lines to benefit from growth in NAND and DRAM prices, which we expect to occur throughout 2020. Moreover, we view MU as a key beneficiary of the ongoing recovery in data center and increased DRAM and NAND content in 5G handsets.”

Gill has a Buy rating on Micron along with a $63 price target. The implication for investors? Upside of 36%. (To watch Gill’s track record, click here)

The majority of the Street backs Gill’s thesis. Based on 19 Buys, 5 Holds and 1 Sell, Micron has a Moderate Buy consensus rating. The average price target is only slightly lower than Gill’s, and at $63.78 is set to provide gains of 37%. (See Micron stock analysis on TipRanks)

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