Every day, Wall Street analysts upgrade some stocks, downgrade others, and "initiate coverage" on a few more. But do these analysts even know what they're talking about? Today, we're taking one high-profile Wall Street pick and putting it under the microscope...

Micron Technology (MU 0.30%) shares are on a tear.

The stock price of this computer memory manufacturer -- maker of both DRAM and NAND flash memory for computers and mobile devices -- has raced ahead 86% in 52 weeks, leaving the S&P 500 in its dust. But would you believe it has even further to run?

Would you believe it could go up another...35%?

Benchmark does. This morning, the tech specialist announced it is initiating coverage of Micron Technology stock with a buy rating and a $80 price target that implies 35% upside from today's share price of $59 and change. Here's what you need to know.

SSD memory cards

Image source: Getty Images.

A cheap stock for value investors

Let's start with the glaringly obvious: Micron stock is cheap.

With a $68.9 billion market capitalization and $12.2 billion in trailing net income, Micron stock sells for only 5.6 times trailing earnings. The company hasn't yet released a complete cash flow statement for its last 12 months, but free cash flow (FCF) for the most recent 12 months that it has released show $6.9 billion in cash profit generated (according to data from S&P Global Market Intelligence), and Micron said in its last earnings release that fiscal Q3 adjusted FCF was $2.2 billion -- about 57% higher than last year's Q3 free cash flow number.

Thus, while I suspect Micron's price-to-free-cash-flow ratio isn't as cheap as its P/E ratio, the gap between earnings and free cash flow appears to be closing -- and Micron's quality of earnings is improving.

Better profits...

That's not all that is improving at Micron, either. Within the global memory market, there's "little evidence of a supply glut in" DRAM, says Benchmark in a note covered this morning on TheFly.com. Meanwhile "on the NAND side of the business," TheFly reports that Micron "has become a cost leader at 64-layer 3D NAND."

Micron is also "in-line or ahead on its QLC transition," which refers to the production of "quad level cell" NAND memory, a technology that permits Micron to pack "33% more capacity per NAND cell than its triple-level cell (TLC) counterpart," improving quality and lowering costs of solid-state memory.

With all these advantages, Benchmark argues that Micron is "likely to gain market share."

...make better balance sheets

Result: Although Micron's free cash flow probably still lags its reported net income, it's probably getting better -- and even if it weren't, $6.9 billion in FCF for a $69 billion stock still wouldn't be too shabby, resulting in a still very reasonable price-to-free-cash-flow ratio of 10.

With so much cash pouring into its coffers, Micron turned "net cash positive" in the May quarter, notes Benchmark. Micron's balance sheet now shows just $5.9 billion in long-term debt versus cash and equivalents worth $7.1 billion. With its balance sheet in fine shape, Benchmark predicts that Micron will soon turn its attention to deploying free cash flow to buy back stock in fiscal 2019, further boosting earnings per share and accelerating earnings growth. The average analyst prediction is that Micron's earnings will grow faster than 23% annually over the next five years.

The upshot for investors

Whether you think of Micron as a stock selling for 5.6 times earnings or 10 times free cash flow, any way you cut it, 23% growth seems more than enough to justify these prices and make Micron stock a buy.