Micron Technology stock offers an attractive buying opportunity as the semiconductor industry recovers, says Citi Research.
On Monday, analyst Christopher Danely reiterated his "Top Pick" Buy rating for Micron (ticker: MU), a leading seller of DRAM memory chips, and reaffirmed his $85 price target, which implies about a 22% of upside. DRAM stands for dynamic random-access memory, commonly used in desktop computers, smartphones, and servers.
After meeting with clients last week, "we had a difficult time getting traction on our Buy Micron call. Investors believe that Micron's valuation already incorporates the upturn in DRAM," he wrote. "We disagree."
The analyst noted memory pricing has started to recover as the major chip makers have cut production. He now predicts memory-chip prices will rise 10% quarter over quarter in the fourth quarter, and rally 32% year-over-year in 2024.
The improving trends should spark a rally in Micron's stock price as the company's earnings improve, according to Danely.
"We believe the negative profitability will disappear within a few quarters as inventory goes down, utilization rates increase, and DRAM prices increase, driving Micron back to solid profitability," he wrote.
Micron stock has risen about 40% this year, roughly in line with the 39% rise in the iShares Semiconductor exchange-traded fund $(SOXX)$. The ETF tracks the performance of the ICE Semiconductor Index, of which Micron stock is a component.