Shares of Micron Technology (MU 2.36%) are currently down 16% since they hit a 52-week high of $130.54 earlier this month. Some investors are concerned about weakness in key markets where Micron supplies its memory and storage products.
However, Citigroup's analyst still sees solid fundamentals in Micron's business. The firm recently maintained a buy rating on the shares with a $150 price target, representing upside of 37% from the April 22 closing price of about $109.
Here's why the analyst believes the stock can move higher within the next year or so.
Demand for AI servers is a major growth catalyst
In its recent earnings report, Taiwan Semiconductor Manufacturing noted soft demand trends in some of the markets that Micron depends on for revenue. But weak demand in PCs, smartphones, and traditional servers didn't prevent Micron from reporting strong growth last quarter.
Micron's revenue jumped 58% year over year in its fiscal 2024 second quarter (ended Feb. 29). The company's outlook calls for improving selling prices for memory and storage chips this year. Management also expects to achieve record revenue and profitability in fiscal 2025.
Artificial intelligence (AI) servers require loads of memory bandwidth to process new data. The sweeping investment in AI servers is still in the early innings, so Micron should see its annual revenue hit new records over the next several years.
Why buy Micron stock
The stock is trading at a forward price-to-earnings (P/E) ratio of 14 based on analysts' consensus estimate for fiscal 2025. Historically, Micron stock has traded at an average P/E closer to 15, so investors can still expect some upside from current levels.
It doesn't seem unreasonable to expect the stock to potentially hit the analyst's price target within the next 12 to 18 months, especially if other markets like smartphones start to show a stronger recovery.
