Micron Technology stock has fallen well below its recent highs. But the memory-chip maker can more than recoup its recent losses, according to KeyBanc analyst John Vinh.
Vinh reiterated a price target of $1,750 in a research note Monday, implying a nearly 140% gain from current levels.
That's an ambitious call for a stock that has dropped 23% in the past month. As Barron's has previously covered, the slide has mostly been due to fears that Democrat victories in midterm elections will slow construction of artificial-intelligence data centers, and therefore hit demand for memory in AI servers.
But Vinh argues the latest figures tracking the growth of cloud-computing bode well for Micron and other chip stocks, with October numbers showing 2% growth month-on-month and 12% growth from the same period the prior year. The numbers show a "return to strong traditional server growth," according to the analyst.
Vinh has been a consistent fan of Micron. Last month he called it one of his favorite ideas in the semiconductor sector. At that time he noted prices for dynamic random-access memory (DRAM) in the fourth quarter were expected to rise by between 15% and 20% from the previous quarter and Alphabet's Google was looking at extending long-term memory-supply agreements through to 2035.
The KeyBanc analyst gets his price target by applying a price-to-earnings multiple of six times his estimate for Micron's fiscal 2028 earnings. He noted Micron is currently trading at a PE multiple of just four times the consensus forecast for fiscal 2027, compared with a three-year median average of nine times.
Skeptics of the sector argue that memory companies shouldn't be valued on PE ratios as they inevitably look cheap at the peak of their cyclical earnings. But Vinh and other optimists argue the AI boom is set to prolong Micron's strong earnings for at least another 18 months, meaning the stock is just too cheap to ignore.