TLDR
- Micron stock rose 1.2% in Tuesday’s premarket to $1,028.80, up 18% over the past month
- DRAM prices rose 6% in July month-over-month; NAND prices climbed 9%
- Q4 revenue is projected at $50.41 billion, up from $11.32 billion a year ago
- Adjusted EPS is expected to jump to $30.89 from $2.84 in the same quarter last year
- Analysts have an average price target of $1,295, about 27% above current levels
Micron stock was trading at $1,028.80 in Tuesday’s premarket, up 1.2% on the day, continuing a strong run that has seen the stock gain 18% over the past month. The latest memory chip pricing data appears to be giving investors another reason to buy.
According to World Semiconductor Trade Statistics, average selling prices for DRAM rose 6% in July from the prior month. NAND prices climbed 9% over the same period. J.P. Morgan analyst Harlan Sur noted that June data was also revised upward, with both DRAM and NAND sales revised about 6% higher.
DRAM accounts for roughly three quarters of Micron’s revenue, making those price moves particularly relevant heading into earnings.
Micron is set to report fiscal fourth-quarter earnings on September 30. Analysts expect revenue of $50.41 billion for the quarter, compared with $11.32 billion in the same period a year ago. Adjusted EPS is projected at $30.89, up from $2.84 a year earlier.
That would be a dramatic acceleration. Micron’s Q3 revenue hit $41.5 billion, up 74% from Q2 and up 346% from the same quarter a year ago.
Strong Momentum in the Charts
From a technical standpoint, MU has climbed from a July low of $736 to around $1,016, a gain of nearly 40%. The stock is holding above its 50-day Exponential Moving Average and sits above the Ichimoku cloud and Supertrend indicator.
The Relative Strength Index has moved up to 60, its highest reading since late June, suggesting building momentum. Bulls are eyeing the $1,253 level as the next key resistance, which would represent about 22% upside from current prices.
The stock has also been moving in line with other memory names including SanDisk, Samsung Electronics, and SK Hynix.
Valuation Looks Cheap Relative to the Market
Despite the run-up, Micron’s forward price-to-earnings ratio sits at 13.85. The S&P 500 trades at roughly 19.9 times forward earnings, and the technology sector sits at around 22 times. That gap has caught the attention of analysts.
The average analyst price target is $1,295, roughly 27% above where the stock is trading now.
Micron does have some limits on how much of the rising chip prices flow directly into revenue. The company has locked in long-term supply agreements with major customers, which cap prices in exchange for margin certainty. Still, the direction of pricing is clearly in its favor.
Key customers including Nvidia, AMD, Google, and Amazon have all recently reported strong results and raised forward guidance, which points to continued demand for Micron’s products.
Micron’s management has guided for Q4 revenue above $50 billion, and analysts expect annual revenue to reach $242 billion next year.
The September 30 earnings report is the next major event on the calendar for MU investors.
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