Shares of Micron Technology (MU -0.56%) have surged to new highs this year as the memory chip leader is on the verge of returning to profitable growth. The stock still has room to run, according to Citi analyst Christopher Danely.
After talking with the company's management team, the analyst maintained a buy rating on Micron stock with a $150 price target, which would represent upside of 21% from Friday's closing price of $123.58.
Why buy Micron stock
Micron is one of the leading suppliers of dynamic random access memory (DRAM) and solid-state storage for computers, smartphones, and data centers. Revenue from these products can swing wildly every few years due to cyclicality, and you can see the downward trend since 2022.
Data by YCharts.
However, Micron is starting to experience a recovery, and this could lead to substantial revenue increases over the next few years.
Management characterized the demand from artificial intelligence (AI) servers as "exceptionally strong" in the most recent earnings report. The uptick in demand is helping to tighten supply and drive up selling prices for memory chips. Revenue jumped 58% year over year in the company's fiscal 2024 second quarter (ended Feb. 29).
Looking ahead to fiscal 2026 earnings estimates, the shares trade at a relatively modest forward price-to-earnings ratio of 12. This isn't a cheap valuation for a company that operates in a cyclical industry, but management sees a record year for revenue in fiscal 2025, which could send shares even higher than the analyst's price target.
