Semiconductor chips are in demand, thanks to the acceleration in the pace of digitization. Moreover, their wide application in our modern-day life is leading to an imbalance between demand and supply. While demand for chips remains elevated, one shouldn’t imply that all semiconductor stocks are exhibiting dazzling returns.
Take shares of Micron (MU) as an example. Micron stock has erased all its gains and is trading in the red so far this year.
The downtrend in DRAM (dynamic random-access memory) prices weighed on Micron stock, which fell nearly 20% in the past six months. (See Micron stock charts on TipRanks)
Despite the decline, I am bullish on Micron stock, due to its strengthened balance sheet (cash and investments of $9.8 billion at the end of Q3 and investment-grade rating), higher NAND revenues, and shareholder-friendly initiatives, including initiation of dividend and share repurchases.
Notably, TipRanks’ Stock Investors tool suggests that investors who hold portfolios on TipRanks have chipped in to buy Micron stock. Investors currently have a Very Positive outlook on Micron stock, with 3.7% of investors increasing their exposure over the past month.
Micron announced a quarterly dividend of $0.10 a share, payable on October 18 to shareholders on record as of October 1. Commenting on its capital returns program, Micron CEO Sanjay Mehrotra said that dividend initiation reflects management’s confidence in the company’s prospects.
Showing confidence in Micron’s capital returns program, Rosenblatt Securities analyst Hans Mosesmann stated that “Micron changing its share repurchase tactics to be cross-cyclical than yearly, to opportunistically be aggressive when shares are below their intrinsic value.”
While Mosesmann acknowledged that Micron stock is under pressure due to “negative DRAM prices,” he termed Micron as his favorite MOAC (Mother of All Cycles) cycle play.
It is worth noting that Micron has ramped up its DRAM+NAND production, which positions it well to capitalize on favorable demand trends.
To wrap up, Mosesmann listed factors like AI training and inferencing workloads, accelerated pace of DDR5 transition, and “Windows 11 demand dynamic,” which the street is “ignoring studiously.” Mosesmann has a Buy rating on Micron stock.
Overall, Micron stock commands a Moderate Buy consensus rating, based on 16 Buys and 6 Holds. The average Micron price target of $112.63 implies 52.1% upside potential to current levels.
Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of Tipranks or its affiliates, and should be considered for informational purposes only. Tipranks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. Tipranks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by Tipranks or its affiliates. Past performance is not indicative of future results, prices or performance.
