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Why Micron (MU) Can be an Attractive Investment Right Now
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Micron Technology Inc. (MU - Free Report) is firing on all cylinders driven by a surge in DRAM and NAND chip prices. This is primarily due to imbalances between industry demand and supply, which are leading to periodic shortage and temporary price hike.
Micron is benefiting from robust demand for its high-performance chips in rapidly growing markets like Cloud Computing, Artificial Intelligence (AI), Augmented Reality (AR) and varied application of the Internet of Things (IoT) technology.
The Zacks Consensus Estimate for earnings in fiscal 2018 and 2019 earnings has increased significantly over the last 30 days, primarily driven by improving fundamentals and strong growth prospects.
The stock hit a 52 week high of $49.89 on Nov 22. Moreover, Micron shares have returned 126.6% year to date, significantly outperforming the S&P 500’s gain of 16.6%.
DRAM Demand Remains Strong
We note that DRAM accounted for 66% of fourth-quarter fiscal 2017 revenues. Cloud sales jumped roughly 50% year over year driven by increasing DRAM content per server.
DRAMeXchange projects that demand for DRAM will jump 20.6% in 2018 from an estimated increase of 19.6% in 2017. The primary driver is expected to be higher storage demand from smartphones and servers.
Smartphones have witnessed an increase of 33.4% in DRAM content this year, to an average of 3.2 GB per device. As smartphone original equipment manufacturers (OEMs) plan to launch devices with higher capacity and more demanding applications like AR and AI, demand for DRAM is expected to grow much faster.
Moreover, server DRAM demand is expected to remain strong as Cloud Data Center customers seek innovative solutions to reduce their workload. The high-density modules based on advanced manufacturing nodes have come to the market, urging server OEMs to overhaul and shift to new technology for better results. This also provides significant growth opportunity for Micron.
Expanding Footprint in SSD Market
Micron has been expanding into the solid-state drive (SSD) storage market that has helped it to offset sluggishness in the PC market. SSDs take less space, which means it is more suitable for mobile, thinner laptops and tablets. In the fourth quarter, storage revenues soared 71%, primarily driven by strong demand for SSD products.
In this regard, Micron’s partnership with Seagate Technologies (STX - Free Report) has given a significant boost to its high-value enterprise SSD portfolio. Management projects healthy demand for SSDs, with demand for higher-density SSDs expected to improve in the long haul.
Per TechNavio, the enterprise SSD market is projected to witness a CAGR of 17% over 2016-2020. The strong projection bodes well for Micron.
Long-term earnings growth for Intel and NVIDIA is currently pegged at 8.4% and 11.2%, respectively.
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With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
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Why Micron (MU) Can be an Attractive Investment Right Now
Micron Technology Inc. (MU - Free Report) is firing on all cylinders driven by a surge in DRAM and NAND chip prices. This is primarily due to imbalances between industry demand and supply, which are leading to periodic shortage and temporary price hike.
Micron is benefiting from robust demand for its high-performance chips in rapidly growing markets like Cloud Computing, Artificial Intelligence (AI), Augmented Reality (AR) and varied application of the Internet of Things (IoT) technology.
The Zacks Consensus Estimate for earnings in fiscal 2018 and 2019 earnings has increased significantly over the last 30 days, primarily driven by improving fundamentals and strong growth prospects.
The stock hit a 52 week high of $49.89 on Nov 22. Moreover, Micron shares have returned 126.6% year to date, significantly outperforming the S&P 500’s gain of 16.6%.
DRAM Demand Remains Strong
We note that DRAM accounted for 66% of fourth-quarter fiscal 2017 revenues. Cloud sales jumped roughly 50% year over year driven by increasing DRAM content per server.
DRAMeXchange projects that demand for DRAM will jump 20.6% in 2018 from an estimated increase of 19.6% in 2017. The primary driver is expected to be higher storage demand from smartphones and servers.
Smartphones have witnessed an increase of 33.4% in DRAM content this year, to an average of 3.2 GB per device. As smartphone original equipment manufacturers (OEMs) plan to launch devices with higher capacity and more demanding applications like AR and AI, demand for DRAM is expected to grow much faster.
Moreover, server DRAM demand is expected to remain strong as Cloud Data Center customers seek innovative solutions to reduce their workload. The high-density modules based on advanced manufacturing nodes have come to the market, urging server OEMs to overhaul and shift to new technology for better results. This also provides significant growth opportunity for Micron.
Expanding Footprint in SSD Market
Micron has been expanding into the solid-state drive (SSD) storage market that has helped it to offset sluggishness in the PC market. SSDs take less space, which means it is more suitable for mobile, thinner laptops and tablets. In the fourth quarter, storage revenues soared 71%, primarily driven by strong demand for SSD products.
In this regard, Micron’s partnership with Seagate Technologies (STX - Free Report) has given a significant boost to its high-value enterprise SSD portfolio. Management projects healthy demand for SSDs, with demand for higher-density SSDs expected to improve in the long haul.
Per TechNavio, the enterprise SSD market is projected to witness a CAGR of 17% over 2016-2020. The strong projection bodes well for Micron.
Zacks Rank & Other Picks
Micron currently sports a Zacks Rank #1 (Strong Buy). Intel Corporation (INTC - Free Report) and NVIDIA Corporation (NVDA - Free Report) are two other stocks worth considering in the broader technology sector. Both carry the same Zacks Rank as that of Micron. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth for Intel and NVIDIA is currently pegged at 8.4% and 11.2%, respectively.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>