Please ensure Javascript is enabled for purposes of website accessibility

Why Micron Technology Stock Popped 11%

By Rich Smith - Feb 6, 2018 at 5:08PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

An earnings pre-announcement wins plaudits from analysts -- and investors.

What happened

Stocks were up broadly in Tuesday trading after Monday's big sell-off -- but few stocks had quite as big a day as Micron Technology (MU -1.32%) did.

On Tuesday, two separate analysts -- KeyBanc and Needham & Co. -- both upgraded Micron stock to various flavors of "buy," with Needham in particular predicting that Micron stock could nearly double in value over the coming year.

Thumb drive in a laptop

Analysts and investors gave memory maker Micron stock a big "thumbs up" Tuesday. Image source: Getty Images.

So what

Those are the analysts' opinions, and they're entitled to them, of course. But is there anything in particular behind those opinions, to justify taking such an optimistic view of Micron stock? Turns out there is, and it comes straight from the mouth of Micron management.

On Monday, Micron preannounced its fiscal second-quarter 2018 earnings results, telling investors that it expects  to earn anywhere from $2.70 to $2.75 per diluted share this year on $7.2 billion to $7.35 billion in sales -- numbers significantly higher than previous guidance, and putting Micron on track (as Needham pointed out) to earn as much as $10 a share this year.

Now what

If Micron succeeds in earning $10 -- and analysts aren't ruling it out, with the consensus being $9.79 per share right now -- it would value Micron stock at less than 4.5 times current-year earnings. For a stock that most analysts agree should be capable of growing earnings at about 10% annually over the next five years, that looks like a big, fat bargain.

That's why analysts upgraded Micron today -- and that's why investors are buying it.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Micron Technology, Inc. Stock Quote
Micron Technology, Inc.
MU
$55.28 (-1.32%) $0.74

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
317%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.