What happened
Shares of semiconductors and computer memory specialist Micron Technology (MU 3.06%) jumped out of the gate on Wednesday and headed higher -- up 6.9% as of 1 p.m. ET.
You can thank an analyst at investment banker Bernstein for that.
Image source: Getty Images.
So what
Supply chain snafus, production problems, and insatiable demand have combined to create a global semiconductor deficit that's lasted for the better part of two years now. Recently, a combination of too-high stock prices and worries that the conflict in Ukraine could decrease demand for semiconductor chips has depressed the shares of many semiconductor stocks -- including Micron's, which is down 19% over the past month.
In a Bernstein analyst's view, however, those worries are overblown -- and Micron shares' retreat is giving investors a great opportunity to buy the stock at a discount. "Macro concerns have prompted a sell-off, but a correction to the memory market, if any, won't be prolonged & won't change the structure," Mark Li said in a note covered today by StreetInsider.com.
Now what
Indeed, The Fly quotes Li's prediction seeing "the DRAM cycle bottoming in the next two quarters," and he says investors can rest assured that "neither Russia nor Ukraine will result in notable supply disruption or demand destruction in the near term."
If the analyst's right about that, then prices on computer memory are due to rise in relatively short order, boosting both revenue and profit margins for Micron -- which, lest we forget, is already generating operating profit margins of 29%. With Micron stock currently trading for less than 14 times earnings, and those earnings expected to rise in short order, Bernstein's Li believes investors have the chance to buy this stock with "a favorable risk/reward trade-off now."
Surprise, surprise -- that's exactly what investors are doing today.
