Is Micron (NASDAQ: MU) About To Hit Fresh Highs?

Shares of semiconductor company Micron (NASDAQ: MU) have rallied 25% since the start of the month, and are quickly undoing the damage done during January’s fall of the same scale. Despite their most recent earnings report showing that revenue growth was decelerating, there are more than a few voices on Wall Street calling them one of the best picks for 2022. And while they may have had a shaky start to the year, they look good value to keep rallying to fresh highs in the coming weeks. Let’s take a look at some of the reasons why. 

For starters, analyst Matthew Bryson and the Wedbush team upped their rating on Micron stock from Neutral to Outperform yesterday, on the basis that the assumptions for NAND’s (Microns new memory storage product) pricing used have become conservative, given the recent disruptions at Western Digital's plants in Japan. In a note to clients, Bryson wrote "and while we see general industry fundamentals as more important to near term results vs. specific company capabilities, we would note that Micron's improved execution around NAND seemingly positions the company to take advantage of any opportunities tied to Kioxia's and WD's struggles.” 

Fresh Upgrades

Bryson also increased his price target on the stock to $120, which suggests that there’s upside of more than 30% to be had from where shares closed on Monday. Considering last month’s all time high tapped out at $98, this would put shares well into blue sky territory. According to Bryson, Micron stands to benefit from the surge in demand that has kept semiconductors a hot name in equities so far this year. He added in his note, that “faster growth in semiconductor content should also translate to greater memory requirements over the next few years and stronger sales for memory players including Micron.” 

His bullishness echoes that of Bank of America, who reiterated their Buy rating on Micron shares last month. Their $100 price target should also be appealing to investors who want to stay exposed to tech but are getting spooked by the NASDAQ’s softness so far this year. BoA analyst Vivek Arya said last month that the company “could see broad based growth in 2022, across the data center, smartphones, PCs and its automotive and industrial markets. Meanwhile, Micron's consistent buybacks and newly announced dividend illustrate their commitment and focus to profitability and FCF generation."

The folks over at Mizuho made a similar move the same week as Bank of America, reiterating their Buy rating and leaving their $98 price target unchanged after an interview with Micron’s CFO David Zinsner. Analyst Vijay Rakesh believes "the broad data center market is strong, with inventory in a good position and good order visibility."

Bullish Outlook

You can probably see the trend here. Alongside the aforementioned voices in the bull camp, Micron can also point to analysts in Citi, Wells Fargo, and UBS who have come out with bullish positions on their stock in the past two months. Considering shares are essentially unchanged since then, you can’t help but feel now is a good time to start building a position. Against the major indices, Micron is performing admirably so far in 2022, which bodes well for the coming months which will be all about inflation readings and Fed rate hikes. Since the first day of the year, the S&P 500 index is down 7.65%, the tech-heavy NASDAQ index is down 12.5%, but Micron is down only 3.5%. Even its closest competitor, Advanced Micro Devices  (NASDAQ: AMD), can’t outperform the major indices, and their shares are down 20% so far this year.

To be sure, there will be headwinds for Micron to navigate in the year ahead, but there’s a lot to like about the long position right now. For a $100 billion high growth tech company, they have a tantalizingly low price-to-earnings ratio of 13, which is more in-line with a slow-moving industrial company. This means investors can get involved without feeling like they’re over-paying. In light of all the recent upgrades and bullish comments as well, there’s definitely a sense that Micron is setting itself up for a run back to recent highs and beyond.