Micron Technology (NASDAQ:MU) stock is a semiconductor play worth looking into right now.
There are too many positives to ignore for investors wishing to gain more exposure to the semiconductor sector.
Micron Technology is experiencing growth and is slated to continue to do so in the foreseeable future.
There are multiple metrics by which that growth can be measured. Probably the most persuasive to investors is price appreciation. Year to date, Micron shares are essentially flat after running as high as $95 in April.
The semiconductor industry is experiencing volatility expected to run into 2022 by many estimates. So those price fluctuations have to be expected.
The more important appreciation metrics relate to the past year’s performance and future expectations. Over the past year, MU stock has increased roughly 62%, from $44 to more than $74.
Further, that growth doesn’t seem likely to stop soon. In fact, the average target stock price for Micron sits at $114.43 and runs as high as $165. That indicates an average upside estimate of 56% with the potential for 126% returns.
Micron might rise soon but isn’t likely to explode overnight. The company recorded $7.4 billion in revenues in its most recent quarterly report back in June. That represented an increase of 19% over the previous quarter and a 36% increase year-over-year.
Consensus estimates are that Micron will reach $8.1 billion in revenues when it reports on Sept. 28. So Micron may indeed be in position to receive a nice bump upward in price in a few weeks.
At the same time, investors should really be looking at MU stock for the longer term, meaning at least a year and a half.
That’s because micron is expected to deliver $27.64 billion in revenues throughout 2021. Then, in 2022 analysts anticipate that Micron will reach as much as $43 billion in revenues. Even if it hits average revenues next year it is still anticipated to experience EPS growth of 87.12%.
And the company’s strong expectations are already flowing back to reward shareholders presently.
Rewarding Shareholders
Micron has been committed to returning capital to its investors for several years. The company announced a share repurchase program back in May of 2018. Since that program began the company has returned more than $4 billion to shareholders.
However, it didn’t pay a dividend until very recently. On Aug. 2 the company announced that it had initiated a dividend.
That means Micron now stands alongside the likes of competitors including Intel (NASDAQ:INTC), Nvidia (NASDAQ:NVDA), and Taiwan Semiconductor Manufacturing (NYSE:TSM) which all provide shareholders with dividends.
In fact, Micron Technology’s 10 cent dividend is greater than Nvidia’s 4 cents. That absolutely larger dividend is also preferable on a yield basis of 0.55% compared to Nvidia’s 0.07%.
While the metrics point toward greener pastures, there are concerns.
Business Environment
Micron derives 97-98% of its business from DRAM and NAND. These are basically the memory components in your computer and other devices. DRAM manages your data while NAND stores it.
According to a recent report, “Enterprise (server & data center), PC, and Mobile make up 80+% of DRAM and NAND demand.”
The industry is cyclical in nature. And for investors in Micron this is a fortuitous time. Demand for DRAM and NAND memory should continue to grow through 2022.
Verdict
Almost every conceivable metric is pointing toward growth and price appreciation for Micron at present. The somewhat ironic truth is that prices look quite low right now. This looks to be a nearly surefire buy-the-dip opportunity.
Micron isn’t a leading name in the semiconductor sector, but that doesn’t matter. Its positioning in NAND and DRAM put it in teh driver’s seat through 2022 and make returns nearly inevitable moving forward. The company is pivoting toward more stability with its recent dividend. It is a cyclical play that is fairly straightforward.
— Alex Sirois
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Source: Investor Place