Micron Gets A Price Target Boost On An An Optimistic DRAM Outlook

Micron Technology, Inc. (NASDAQ:MU) is one of 2017's hottest stocks, but some analysts see a path toward even more upside amid encouraging DRAM pricing trends.

The Analyst

Baird Equity Research's Tristan Gerra maintains an Outperform rating on Micron's stock with a price target raised from $52 to $60.

The Thesis

DRAM pricing is expected to move higher by a single digit rate in the fourth quarter thanks to mobile and data centers, Gerra said in a research report. (See Gerra's track record here.) 

DRAM pricing is also being helped by inventories — which are at "very low" levels at system makers across the server and PC supply chains — implying that pricing could even move slightly higher in the first quarter of 2018, Gerra said. 

Micron's 1xnm ramp appears to be on track and volume shipments to the PC market are expected to begin by the end of the year, the analyst said.

The sustainability of the company's supply and demand trends in 2018, especially for DRAM, should give investors confidence moving forward, Gerra said.

Finally, Baird's $60 price target is based on an 8x multiple on the analyst's fiscal 2018 PF EPS. A $7.40 stock comp is equal to Micron's trough P/E multiple on peak earnings during the last memory cycle and assumes improving fundamentals along with gross margin expansion, according to Baird. 

Price Action

Shares of Micron have gained nearly 120 percent since the start of 2017.

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Photo courtesy of Micron Technology.