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Micron Technologies: Is Bernstein’s $94 Price Target Warranted?
Stock Analysis & Ideas

Micron Technologies: Is Bernstein’s $94 Price Target Warranted?

It’s been a great time to be a semiconductor operation, and Micron Technologies (MU) is no exception. The company recently landed a big boost from Bernstein thanks to a move in ratings. Meanwhile, the larger macroeconomic environment is still looking good for semiconductors in general. Bernstein presented several worthwhile reasons to be bullish on Micron, and I have a hard time disagreeing.

The last 12 months for Micron have been extremely volatile. From April 2021 to October 2021, the company lost nearly half its value. It gained back all those losses and then some in the time between mid-October and mid-January 2022. It then lost close to 20% before recovering and losing once more to reach current levels.

The latest news should serve as a significant boost and seems to have done as much already. Bernstein staged a double upgrade of Micron, taking it from “underperform” directly to “outperform.” It also established a price target of $94 for the company.

Additionally, Bernstein also pointed to a recent sell-off in semiconductor stocks. The new lower prices on many of these companies should establish a worthwhile buy-in point.

Wall Street’s Take

Turning to Wall Street, Micron Technologies has a Strong Buy consensus rating. That’s based on 21 Buys and three Holds assigned in the past three months. The average Micron Technologies price target of $114.09 implies 42% upside potential.

Analyst price targets range from a low of $77 per share to a high of $165 per share.

Hedge Funds, Insiders, and Dividend Make Some Wary

Taking a look at some of the other brass tacks for Micron proves a bit of a mixed bag. The TipRanks 13-F tracker suggests that hedge funds are progressively less interested in Micron with each new quarter. Hedge fund involvement in the company has been steadily declining since September 2020. Further, insiders are selling off shares at a good clip. Right around $22.3 million in shares were sold by insiders in the last three months.

There might have been some redemption from Micron’s dividend history if it had much of one. So far, the company has paid two dividends, one from September 2021 and one from December 2021.

It’s the start of a good streak if the company can keep it up, though $0.10 per share isn’t exactly a bell-ringer. It represents a ~0.25% yield, which substantially lags the technology sector average of 0.69%.

Still a Growing Field, Though Conditions May Get Rough

Bernstein taking particular notice of Micron right now makes sense. The company is just now coming off a major sell-off event that saw share prices go from around $94 to under $70 in the space of two weeks. That does open up an opportunity to buy.

Already, investors are taking advantage; the company has rebounded in the past few days. Bernstein wasn’t the only analyst to take notice. Fitch Ratings, about two weeks ago, upgraded its rating on Micron from “BBB-” to “BBB,” taking note of “conservative financial policies that enable the company to invest in technology leadership through the cycle,” among other points.

However, the overall environment is noteworthy here as well. While semiconductors and chips are still hotly in demand, that demand may be curbed a bit thanks to recent events in China. A resurgence of COVID-19 in China is putting tech production on the back foot.

Only recently—early Wednesday—Foxconn announced it was restarting some production in Shenzhen. Foxconn previously shut down its operations entirely just days prior.

Moreover, Foxconn’s chairman Young Liu revealed that it could be “months” before a decent picture emerges around global supply chain issues. This is backed up by Dr. Eric Ding, who noted that the world’s supply chain may “completely melt down for a period.”

With Chinese production reduced by a resurgent COVID-19, that could hamper the supply chain in several different ways. It may not matter how many chips can be produced if there are no devices being made for them to be part of.

Though it’s worth wondering how much impact will actually be realized, especially thinking of Ford’s Ice Mountain. Ice Mountain—or Dirt Mountain, depending on the season—is the unofficial name for the parking lots stuffed full of nearly-completed Ford Broncos awaiting a few missing electronic components.

Concluding Views

Doing the math on the entire picture for Micron Technologies shows reason to be bullish. The company has recently started up a dividend program that provides extra value for investors.

It’s also one of the biggest names in a field that deals in components hotly desired throughout much of the supply chain. It’s currently trading near its lowest price target, which suggests massive upside potential.

However, it’s currently under fire from insiders and hedge funds alike. Worse, the global supply chain is staring at another major disruption. That may prompt demand for semiconductors to fall as there’s not much production for them to enter into.

There are some negatives afoot for Micron, but there are plenty of positives to back it up as well. Between the overall semiconductor picture and Micron’s role therein, it’s a solid case for those expecting gains from Micron Technologies.

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