Micron Technology Inc. shares rose to their highest levels in more than a year as analysts see signs of improvement in the memory-chip industry, which has spent 2019 trying to dig out of an inventory glut that decimated sales.
Micron MU, -0.16% shares touched an intraday high of $54 Tuesday and reached an intraday high of $54.30 Monday, their highest price since July 27, 2018, weeks after shares hit their highest price since the dot-com bust. For the year, Micron shares are up 68%, with the bulk of that growth coming in the past six months. That compares with a 58% rise in the PHLX Semiconductor Index SOX, +0.51%, a 27% rise in the S&P 500 index SPX, +0.08%, and a 33% gain in the tech-heavy Nasdaq Composite Index COMP, +0.11%.
This week’s rise has coincided with optimistic analyst previews of Micron’s fiscal first-quarter earnings report, which is scheduled to drop after the close of trading Wednesday. Tuesday morning, Wedbush analyst Matt Bryson upgraded Micron to outperform from neutral and hiked his price target to $65 from $44, “due to an improving memory dynamic.”
“We are seeing the first signs of improving DRAM pricing as spot pricing is lifting and certain market participants expect contract pricing for server DRAM will improve in January — a shift we attribute to better hyperscale demand,” Bryson said.
DRAM, or dynamic random access memory, is the type of memory commonly used in PCs and servers, while NAND chips are the flash memory chips used in USB drives and smaller devices such as digital cameras.
“Demand for both NAND and DRAM should accelerate through the course of 2020,” Bryson said. “There are numerous product cycles in place driving additional demand, including: 5G handset rollouts, new gaming consoles, as well as improving hyperscale server spend.”
Morgan Stanley analyst Joseph Moore raised his price target to $56 from $48 as “unexpected DRAM strength bodes well for the next couple of quarters,” but kept his rating at equal weight because of the stock’s current high price.
“The impact of the December 15 tariff, now canceled as of Friday, has been disruptive, driving a surge in demand to get tariff-sensitive product onto boats, clearly pulling demand forward in time,” Moore said.
Susquehanna Financial analyst Medhi Hosseini, who upgraded Micron to a buy rating Monday, leads Wall Street with an $85 price target on Micron. Of the 35 analysts that cover Micron, 18 have overweight ratings, nine have hold ratings, and three have underweight or sell ratings, along with an average target price of $57.77, according to FactSet data. Over the past week, six analysts have hiked their price targets on the stock.
Micron shares fell after the company’s last earnings report in late September on a disappointing outlook. Micron had said it expected adjusted earnings of 39 cents to 53 cents a share on revenue of $4.8 billion to $5.2 billion, when analysts had estimated 53 cents a share on revenue of $4.8 billion. Analysts surveyed by FactSet now expect earnings of 47 cents a share on revenue of $5 billion.