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Micron Technology stock is in the middle of a rally, not the end

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Micron Technology (NASDAQ:MU) stock is a booming game that is booming again.

Since hitting its low on October 13 below $67, MU stock has been on fire. It is trading today at just over $85.

They are still only up 10% for the year, compared to an average gain of 25% for the S&P, but they could catch up with the average by the end of the year.

What drives Micron is the shortage of other chips and the possibility of it ending. Micron manufactures memory, where demand is primarily driven by microprocessors. As more and more microprocessors are manufactured, more and more memory chips are sold. If the chip shortage eases, MU’s stock could skyrocket.

A Closer Look at MU Actions

Demand for memory chips has skyrocketed since Sanjay Mehrotra was recruited as CEO of Micron in 2017.

Mehrotra previously founded SanDisk. He was available after western digital (NASDAQ:WDC) acquired this company in 2016.

I am a fan of Sanjay Mehrotra. I called him Micron’s secret weapon in 2018. He’s led companies through many cycles in the business. He is calm and understands his business perfectly.

Memory has been going through a “super cycle” for years, as chips replace spinning disks in consumer devices and recently in data centers. Chips are faster and more reliable than disk memory. As their price differential narrowed, the shift to these products accelerated.

Analysts like to warn about the peak of the “super cycle” because the end of past cycles has nearly destroyed the industry, but this one is just cooling off, not ending.

It is now considered to run until 2023 and could go well beyond that with a new request from Machine Internet.

Mehrotra sees him continue. He established an investment budget of 150 billion dollars for the next decade. It was this expansion, as much as anything else, that sparked the latest Micron stock buying frenzy.

Time extension

The key to success for Micron is timing expansions against Korean and Chinese competitors.

Micron is now hesitant about new factories, which could end up in his hometown of Boise.

Analysts eagerly watch memory price charts. They know the general direction is down, according to Moore’s Law, but it’s choppy. Some prices have increased in 2019. Firm prices and increasing supply are the formula for success.

That’s what analysts are seeing now. That’s why Evercore’s CJ Muse recently started pounding the table for Micron shares.

His call sparked the latest run in Micron shares, though his $100 price target isn’t far off what other analysts are seeing.

The average target among 22 analysts at Tipranks is $96. Still, the call sparked talk for Micron at WallStreetBets, alongside You’re here (NASDAQ:TSLA) and stoppage of play (NYSE:EMG).

Even now, Micron is cheap for a tech title. With a market capitalization of $93 billion, it trades at just 16 times earnings.

It even has a tiny dividend, although that’s not why you should consider it. You buy it for capital gains.

The essential

I have said many times that I bet on the jockey when it comes to stocks, rather than the horse. A great CEO is worth their weight in gold and a bad one can destroy the biggest corporate giant.

Mehrotra is a good one. Over the past five years, UM inventory has increased by 284%. It’s volatile. This is the kind of action you want to time your entry price for if you can.

Micron is becoming the kind of stock you can buy and forget. Each bust is, at the end, followed by a boom. This is where Micron is heading now. Analysts have understood this, but it’s not too late for long-term investors to get on board.

As of the date of publication, Dana Blankenhorn does not hold any positions at the companies mentioned in this article. The opinions expressed in this article are those of the author, subject to publishing guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. Email him at [email protected] or tweet him at @danablakenhorn. He writes a Substack newsletter, Facing the Future, which covers technology, markets and politics.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.