Shares of Micron Technology (NASDAQ:MU) soared 25.3% in May 2018, according to data from S&P Global Market Intelligence. The gains rode a steady drumbeat of positive analyst notes.
The memory chip giant received many analyst upgrades and price target increases in May, following Micron's annual investor day where management gave presentations to analysts and investors. These presentations left analysts impressed with Micron's stable unit pricing environment and ambitious profit margin targets. Above all else, the $10 billion share buyback that was announced at this event was seen as a strong vote of confidence in Micron's near-term business prospects.
The company would never burn $10 billion on buybacks if another pricing war was brewing on the horizon. That's how Wall Street's thinking goes, and I can't say that I disagree. Buybacks don't always make sense, but this is Micron putting its excess cash to shareholder-friendly use and not a debt-backed program.
Either way, it's hard to complain when Micron shares have gained 88% in 52 weeks amid rising sales and expanding margins. And the stock is still very affordable, trading at seven times trailing earnings and five times forward projections. May's stock surge makes all kinds of sense in that light.