Micron's stock is down 30% in a month. Why Citi says to 'double down' and buy.

MW Micron's stock is down 30% in a month. Why Citi says to 'double down' and buy.

By Emily Bary

Citi analyst expects continued pricing benefits due to tight supply in the market for dynamic random-access memory

Citi analyst Christopher Danely sees opportunity in semiconductor stocks after they've lost ground in recent weeks - and he especially sees room for Micron Technology Inc. shares to bounce back.

Micron's stock $(MU)$ is down nearly 30% in a month, even when factoring in Thursday's 6% rally. "We think it's time to double down on Micron given the recent selloff as we believe the DRAM market will remain tight given the oligopoly," Danely wrote ahead of the open, referring to dynamic random-access memory.

He expects the DRAM market to benefit from reduced capacity that could help pricing, which may be better than anticipated in the third quarter, he added.

Read: Intel CEO bought stock after selloff. That's not the signal you may think it is.

Danely said he could see why semiconductor shares sold off sharply over the past few weeks - with the PHLX Semiconductor Index SOX down 25% from its highs at the time that he published his note.

"We believe the selloff in semi stocks is due to macro factors combined with high expectations and disappointing results," Danely wrote, noting that consensus earnings expectations have fallen 11% for the sector, with certain companies including Intel Corp. $(INTC)$ serving as particular drags.

Still, Danely began the title of his latest report with "Don't Fear the Reaper," and he cheered a buying opportunity in the chip sector.

"We remain bullish on the space as the main reasons we are positive - AI and memory strength - remain intact," he wrote.

Among the buy-rated names he follows: Advanced Micro Devices Inc. $(AMD)$, Analog Devices Inc. $(ADI)$, Broadcom Inc. $(AVGO)$, Microchip Technology Inc. $(MCHP)$, Micron, Nvidia Corp. $(NVDA)$ and KLA Corp. $(KLAC)$

Read: Nvidia's stock offers 'tremendous opportunity' after selloff, this analyst says

The semiconductor sector was bouncing back Thursday, as all members of the PHLX Semiconductor Index were in positive territory and up at least 3.3%. The index on the whole was ahead about 6%.

While chip-stock action has been choppy, Mizuho desk-based analyst Jordan Klein wonders if there could be hope in the software sector, as evidenced by strong reactions to recent earnings from the likes of cybersecurity company Fortinet Inc. $(FTNT)$ and marketing-software company Klaviyo Inc. $(KVYO)$

Fortinet's results proved "a lot better than expected," Klein said in a Thursday note, and Klaviyo is exposed to smaller businesses, which had been a broad area of investor caution. "To me this can help broader sentiment some towards software that [the] sky is not falling," he wrote.

Don't miss: Fortinet's stock bounces back after an upbeat earnings outlook

-Emily Bary

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August 08, 2024 15:54 ET (19:54 GMT)

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