Micron: Why Now Is the Time to Be Brave

Key Points

• Micron shares have had a tough week, but the long-term outlook remains strong. 
• Analysts remain bullish, with some price targets calling for a 70% upside. 
• The stock's RSI also suggests the stock is highly oversold and poised for gains.

Micron Technology Inc NASDAQ: MU shares have been struggling to catch their breath after a sharp 25% drop over the past week. The selloff followed a tough earnings report and broader market jitters as the Fed dampened expectations for a rate cut. Stocks, in general, have had a rough end to the year, but Micron's drop stands out. The stock is now trading near a solid line of support, back at levels not seen since early 2021. For those of us on the sidelines, it's tempting to see this as a golden entry opportunity. But before jumping in, let's take a closer look at where Micron stands today.

With a $95 billion market cap, it's a key player in memory and storage solutions—both of which are critical for AI's ongoing development. And while the stock looks far removed from its June highs, there are several reasons investors should be getting excited.

Fundamental Performance 

To start with, let's take a look at Micron's latest earnings report. The company easily beat expectations last week for both the top and bottom lines. However, a weak outlook for the next quarter spooked investors. Specifically, Micron is forecasting adjusted earnings between $1.33 and $1.53 per share, well below the $1.92 consensus estimate. Similarly, its revenue guidance of $7.7 billion to $8.1 billion came in below Wall Street's $8.99 billion target.

Still, there's reason for optimism. CEO Sanjay Mehrotra noted that "while consumer-oriented markets are weaker in the near term, we anticipate a return to growth in the second half of our fiscal year." Mehrotra also highlighted Micron's market share gains in high-margin segments and its strategic positioning to capitalize on AI-driven growth. Investors should look for the stock to continue recovering once the broader market digests the recent news.

Bullish Analyst Updates 

In a note to clients, the team over at Barclays leaned into this likelihood as they reiterated their Buy rating on Micron, and they weren't the only ones. Multiple bullish updates from the analysts suggest confidence in the stock's long-term potential despite the wobble in the company's forward guidance. Piper Sandler and Cantor Fitzgerald also came out with Buy ratings, pointing to Micron's strong fundamentals and AI exposure.

Perhaps the most compelling update came from JPMorgan Chase. Their team set a price target of $145, which, from where the stock was trading on Monday morning, points to an incredible upside of 70%. The fact that analysts are sticking to their Buy ratings despite the near-term turbulence underscores their belief that this is a stock that's worth watching closely.

Potential Concerns 

Still, it's unlikely to be all plain sailing for Micron, and investors should be aware of some lingering risks. While most analysts maintained their Buy ratings, most also reduced their price targets in light of the company's dimmed near-term outlook. There's also the fact that not all of them have the stock rated a Buy, with Morgan Stanley maintaining their Equal Weight rating. Even so, its reduced price target of $98 still sits above Micron's last close at $85, suggesting the stock may be oversold.

Getting Involved

The final piece of the puzzle supporting the bullish play is the technical setup, which adds another layer of excitement. One key indicator, the Relative Strength Index (RSI), shows that Micron is entering oversold territory as it has fallen to 34. For context, an RSI below 30 typically signals a stock is extremely oversold and due for a rebound. While Micron hasn't hit that threshold just yet, it's within touching distance, and this, when considered along with the other factors mentioned above, only lends itself further to the comeback rally narrative.

Investors should be looking at some bounceback gains heading into the start of 2025, supported by strong endorsements from analysts. With AI remaining a central growth driver, Micron's long-term outlook is hard to ignore. For those willing to be brave, the combination of a beaten-down price and solid technical support could make 2025 a standout year for this stock.