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Bull of the Day: Micron Technology (MU)

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Micron Technology (MU - Free Report) is a Zacks #1 (Strong Buy) that is one of the leading providers of semiconductor memory solutions.  The company manufacturers and markets high performance memory and storage technologies.

Micron reported earnings back in late September, which brought buyers slowly back into the stock under the $50 level. Then last week, the company raised its guidance, which has helped the stock take off and hit all-time highs.

About the Company

Micron is headquartered in Boise, Idaho and has 40,000 full-time employees. The company operates four segments: Compute and Networking Business Unit, Mobile Business, Storage Business Unit and Embedded Business Unit. Through those segments the company provides memory products for cloud servers, enterprise, client, and consumer storage markets.

The company has a market cap that just passed $80 Billion and has Zacks Style Scores of “C” in both Growth and Vale, but “B” in Value. The stock pays no dividend and has a Forward PE of 20.

Q2 Earnings and Guide

In late September, Micron reported Q4 EPS with an 8% surprise to the upside. While the beat wasn’t substantial, it was the sixth straight surprised to the upside for the company. The company guided Q1 lower, so there was hesitancy from the bulls to buy the stock.

However, last week the company raised its guidance back to previous levels, raising numbers from $0.40-0.54 to $0.69-0.73. Additionally, the company saw revenues much higher than expected and also sees gross margins coming in above the prior guidance.

CEO Comments

The guide was released at the Credit Suisse Technology Conference. Afterwards, Micron CEO Sanjay Mehrotra got the bulls hooked during his presentation saying the company saw strength “pretty much across the board”. Mehrotra pointed to strength in pricing, mitigating Huawei ahead of schedule, strong execution, strength in DRAM, and said the company is well positioned for both cost and performance moving ahead.

Estimates and Upgrades

Over the last 7 days, estimates have surged higher. For the current year, we have seen estimates raised by 49%, from $0.46 to $0.70. For next year, we have seen a 31% move higher in that same time frame.

Analysts have taken price targets higher since earnings, with JPMorgan giving the stock an $85 price target.

Stock Reaction and Technicals

The guide and presentation brought the bulls roaring back in, helping the stock move from $65 to $74 in just a few days. The stock had been stuck in the $40-50 range for a few years, with failed breakouts and breakdowns occurring every few months.

Micron now looks to be breaking out after surpassing the 2020 and 2018 highs. Those that like buying pullbacks can target the $64 level, where the 21-day resides. For those value players, the $56.25 level is the 50-day. We might now see those prices as the stock could extend higher to $80, which is the 161.8% Fibonacci extension drawn from 2020 highs to lows.

Bottom Line

It’s been a long-time coming for Micron, but  the breakout is now on. The stock has the chance to be the next big semi stock to make an absurd run. Can it follow the likes of AMD and NVDA? Probably not, but with the momentum and earnings growth behind the name, the stock looks to trade much higher from current levels.

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