Micron (MU 3.21%) stock tumbled 6% Monday morning before clawing its way back to about a 1.8% loss as of 12:55 p.m. ET in the afternoon. But it's curious that Micron dropped at all today...
Because today was the day that analysts at TD Cowen predicted Micron stock will surge 55%, and eventually hit $600 a share.
Image source: Getty Images.
Why TD Cowen loves Micron stock
Micron will earn $60 per share this year, rather than the $50 it previously forecast, says TD Cowen. At 10 times forward earnings, this implies a $600 share price for the semiconductor stock.
And that's just to start.
DRAM supplies will remain tight for "multiple years," reports TheFly.com, boosting prices for the computer memory product. Micron might not earn $60 every year, but TD's analysts think "normalized" earnings for the stock could be $50. Positing a 12-times normal earnings valuation for the company, TD again comes up for a $600 valuation for Micron stock.
NASDAQ: MU
Key Data Points
Is Micron stock a buy?
So why is all the above adding up to Micron stock falling in price today?
Actually, as Barron's reports, the reason Micron is falling has little to do with what TD Cowen says, and more to do with the fact that Micron rival Samsung is preparing to begin "large-scale production of the next generation of high-bandwidth memory chips as soon as this month."
If Samsung increases HBM DRAM production, the worry is, this will increase supply, and short-circuit the DRAM price increases that TD is counting on to boost Micron's profits and drive its stock price higher.
That's the real reason Micron is going down today: the risk the cyclical semiconductor industry will do what it always does, and that today's boom will become tomorrow's bust.
