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Micron Shares Get Fresh Boost on Citigroup Analyst's Upgrade

Shares of Micron Technology Inc. MU got a fresh boost yesterday after Citigroup analyst – Christopher Danely – gave a bullish note on the stock. Citing estimates compiled by William Yang, Citigroup's Asia hardware analyst, Christopher noted that the PC market has shown consistent strength in second-quarter 2017 which will have a positive impact on Micron.

Per the analyst, overall notebook shipment grew 7% on a sequential basis in the second quarter, which is way above the anticipated growth rate of 4%. Christopher also added that Citigroup expects ODM notebook shipments to grow 6% in third-quarter 2017.

The firm also quoted that 20% of total DRAM production is consumed by the PC end market. An increase in PC shipment will definitely raise the demand for DRAM. Due to higher demand, along with limited supply, the firm expects DRAM prices to remain strong in the near term.

Strength in PC demand and increasing DRAM prices will eventually benefit Micron in our opinion, as the company generates approximately 25% of its revenues from selling DRAM to the PC end market.

The bullish note by Christopher raised investors’ confidence on Micron, sending the stock up nearly 2.9% yesterday. Notably, at yesterday’s close price of $31.37, the stock has returned 43.1% in the year-to-date period, outperforming the Zacks categorized Electronics-Semiconductor industry’s gain of just 15.3%.

It should be noted that Christopher is not the only analyst who is optimistic on Micron’s growth prospect. A number of other industry experts also believe that total demand for DRAM could surpass manufacturing capacity, leading to a periodic shortage and higher pricing in the near term. We believe that any increase in prices will have a favorable impact on the company’s top line, the benefit of which is likely to flow down to the bottom line.

Looking at the aforementioned factors, along with strategic initiatives, that includes acquisitions and expansion in the SSD market, we consider that Micron is one such technology stock which is worthy of remaining in investors’ portfolio.

Currently, Micron sports a Zacks Rank #1 (Strong Buy).

Some other top-ranked stocks in the Electronics-Semiconductors space are Applied Optoelectronics, Inc. AAOI, Broadcom Limited AVGO and Advanced Micro Devices Inc. AMD. While Applied Optoelectronics and Broadcom boast a Zacks Rank #1, Advanced Micro carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term expected EPS growth rates for Applied Optoelectronics, Broadcom and Advanced Micro are 18.8%, 13.6% and 6.3%, respectively.

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