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Here’s Why Micron Technology, Inc. (MU) Stock Could Double in 2017

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Micron Technology Inc. (NASDAQ: MU ) is coming off a banner year. Micron stock has more than doubled over the past 12 months, advancing from $10.85 in the third week of January a year ago to $22.85 now. There are reasons to believe it could double again over the next 12 months.

The Pros Like Micron Technology, Inc. (MU) Stock ... Should You?

Source: Mike Deal via Flickr

For starters, MU stock is cheap, at least on a forward price-earnings basis.

MU stock trades at less than eight times next year's earnings estimates, and analysts are expecting a major per-share earnings boom - from six cents to $2.42 - next year, on the heels of the company's first profitable quarter in a year. Why? Primarily because its DRAM and NAND prices are soaring.

Higher Chip Prices Benefit Micron Stock

Both are memory chips that saw huge dips in sales over the past two years due to oversupply and a sharp decline in PC usage, precipitated by the rise in mobile devices. But both are bouncing back as supply has waned and demand has improved more than expected.

As a result, NAND prices are up 23% this month alone, while DRAM (dynamic random-access memory) prices have risen 12%. Credit Suisse expects DRAM prices to rise more than 25% this year thanks in large part to the supply shortage.

Meanwhile, uses for the NAND are expanding, as the flash memory chip is now utilized for the Internet of Things and automotive computing markets, among others. Micron has forecast as much as a 45% increase in NAND demand in the coming years.

Speaking of supply and demand, Micron stock is benefitting from a glut of buyers after a massive selloff knocked MU back from as high as $36 in late 2014 to as low as $9 just eight months ago. Sellers were out in force, as institutional ownership slumped to as low as 83% last March.

Now that the company's main products are showing significant signs of life, investors are snatching Micron stock back up on the cheap - institutional ownership is back above 90%. Mind you, most of that buying occurred before the company turned profitable again in the fourth quarter, following three straight quarters of losses.

With prices for its two biggest products spiking, Micron is expecting greater profits to come. And with Micron stock still trading 40% below its 2014 peak, there's plenty of room for improvement.

From a technical standpoint, MU is setting up well. The stock has retreated a bit from its December highs above $23, but still trades comfortably above its 50-day moving average.

Click to Enlarge As the chart below shows, the stock has scarcely dipped below that average since May.

That's a good-looking chart! If MU follows the same pattern of the past eight months, another break to the high side is likely forthcoming after this period of consolidation. Translation: this is a solid entry point into a stock that's been advancing for eight months - and is still cheap!

Ideal Entry Point for MU Stock

As with any semiconductor, there's risk involved, particularly if DRAM and NAND prices plateau and Micron's earnings aren't as strong as projected. Or if competition from the likes of Intel Corporation (NASDAQ: INTC ) proves to be too much.

Given the valuation, the momentum and the return to profitability, however, I think Micron stock looks like a fairly low-risk intermediate-term buy. If the stock breaks below its 50-day moving average (currently $20.40), I might change my tune.

But right now, the next 12 months for Micron stock look as promising as the past 12.

As of this writing, Chris Fraley did not hold a position in any of the aforementioned securities.

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The post Here's Why Micron Technology, Inc. (MU) Stock Could Double in 2017 appeared first on InvestorPlace .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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