Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Why Micron Technology Inc. Shares Will Fly Near $35

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Micron Technology  (NASDAQ: MU  ) gained about 2% this morning after RBC Capital upgraded the DRAM products specialist from sector perform to outperform.

So what: Along with the upgrade, analyst Doug Freedman raised his price target to $34 (from $27), representing about 31% worth of upside to Friday's close. So while contrarian traders might be turned off by Micron's price strength over the past year, Freedman's call could reflect a sense on Wall Street that industry tailwinds give the company plenty of room to run.

Now what: According to RBC, Micron's risk/reward trade-off is rather attractive at this point. "While Micron could be viewed as a restructuring story in the near term given its many moving parts, we believe that the company's efforts to improve NAND quality should become more transparent through the next 6-12 months," said Freedman. He continued:

On the DRAM side, higher margin levels are likely sustainable given mix-shift movements, upcoming 20nm cost-downs, fundamental industry shifts in participants, and tight industry supply (low channel inventories). ... Our view remains that the memory industry is benefiting from the law of diminishing cost savings, which is expected to result in a multi-year cycle of higher revenues and operating margins in both DRAM and NAND.

When you couple Micron's red-hot stock price -- now up about 150% over the past year -- with its still-hefty debt load, however, I'd hold out for a much wider margin of safety before buying into that bull case. 

The biggest thing to come out of Silicon Valley in years
If you thought the iPod, the iPhone, and the iPad were amazing, just wait until you see this. One hundred of Apple's top engineers are busy building one in a secret lab. And an ABI Research report predicts 485 million of them could be sold over the next decade. But you can invest in it right now... for just a fraction of the price of AAPL stock. Click here to get the full story in this eye-opening new report.

Read/Post Comments (3) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 19, 2014, at 2:37 PM, Tgar13 wrote:

    What? I swear you give a great bull scenario and then bam! Price has run too far and it has debt so I'm not buying

    Any discussion on their future free cash flow and

    Their ability to pay off debt and buy their warrants?

    Any discussion of possible earnings per share in 2016 given multi year increase in revenue predicted by RBC and the oligopoly that has developed in the

    Memory industry?

    No! There is sadly none and this fool does not

    Give TMF readers truly Foolish Advice

  • Report this Comment On May 20, 2014, at 2:55 AM, h2nick wrote:

    So, apart from reprinting parts of the RBS press release re their MU upgrade, all this Fool has actually added is that MU has a 'still-hefty debt load'

    This is more of a link to the TMF newsletter service than an actually useful article.

  • Report this Comment On May 21, 2014, at 5:00 PM, richak28 wrote:

    Okay I closed my call options a day or 2 ago and

    expect to enter some puts soon or buy more calls

    depending on the market...

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2962976, ~/Articles/ArticleHandler.aspx, 9/5/2015 8:46:47 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Brian Pacampara

I take a look at big 10% moves, as well as stock-shaking analyst calls, on a daily basis for The Fool. While I don't believe in active trading, closely monitoring Mr. Market's mood swings can help identify long-term opportunities.

Today's Market

updated 11 hours ago Sponsored by:
DOW 16,102.38 -272.38 -1.66%
S&P 500 1,921.22 -29.91 -1.53%
NASD 4,683.92 -49.58 -1.05%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/4/2015 3:59 PM
MU $16.82 Up +0.23 +1.39%
Micron Technology,… CAPS Rating: ****