What happened
Shares of computer-memory maker Micron Technology (MU +0.59%) were down 7.5% as of 11:25 a.m. ET today. This morning, investment bank Piper Sandler downgraded shares of Micron stock to underweight (i.e., sell).
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So what
This morning, Piper Sandler downgraded the stock on concerns about the economy in general, and about DRAM prices in particular.
DRAM prices are dropping, the analyst warned, and Micron has an "oversized [55%] exposure to mobile, PCs, and other consumer end-markets" that use this form of computer memory. Piper is predicting that DRAM prices will not recover, but rather accelerate their decline as the economy slows down and demand falls. Moreover, Piper is seeing price declines in NAND memory as well (the other big part of Micron's business) for the past three months, StreetInsider.com reports.
To summarize Piper's outlook, the economy is slowing, demand for computer memory is falling and will continue to fall, and this is likely to result in a glut of both DRAM and NAND.
Now what
This sounds like the start of a down cycle in a cyclical industry, and in the near term that could be bad news for Micron. But what if we focus on the long term rather than obsessing over short-term cycles?
If we do that, then the picture for Micron looks a whole lot prettier. From the long-term perspective, Micron stock costs 9.4 times earnings today, and analysts forecast that over the next five years, earnings may bop around a bit, but will end up growing 27% per year on average.
Given that this works out to a price/earnings-to-growth ratio (PEG ratio) of about 0.35 for Micron, and that value investors generally favor stocks with PEG ratios anywhere below 1.0, today's sell-off looks like a buying opportunity to me.
