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Three Reasons Why Micron Technology, Inc. Can Go Even Higher

Micron Technology, Inc. (Nasdaq:MU) stock has already exploded after two years of poor performance. On a one-year basis, the stock has moved from just $12 to the current price of just over $30. Not surprisingly, given the rapid gain, some investors are nervous that the stock is moving into overvalued territory and that there is limited upside potential left. These bears (see, for example KeyBanc’s Weston Twigg) warn that the stock will crash if demand for Micron’s DRAM and NAND memory chips cool off. However here are three reasons why bulls believe the stock still has further room to grow:

1. Ongoing Fundamental Momentum – Micron’s stock has been propelled by tight supply/ demand dynamics due to increased demand from cloud providers, smartphone manufacturers, vehicles and networks. In the first nine months of fiscal 2017 DRAM sales rose 70% and NAND sales 40% when compared with the same period in 2016. And this increased demand has boosted prices- for example in the fiscal third quarter just reported by Micron DRAM prices were up 14% and NAND 17%. Over half of Micron’s revenue comes from DRAM hence the big knock on effect on Micron’s overall strength. For example, Micron has also finally announced that in fiscal Q3 it has again achieved free cash flow- money...