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Last week on CNBC Crazy money, host Jim Cramer, expressed his optimism with regard to the actions of Micron Technology (MU). The stock, which is currently trading at $ 49.60, rose 0.9% yesterday and 56.3% since the beginning of the year.
Micron outperformed most peers in the semiconductor industry. This year, Marvell Technology (MRVL), NVIDIA (NVDA), Qualcomm (QCOM), Intel (INTC) and Broadcom (AVGO) grew by 55.1%, 31.3%, 38.6%, 10.6% and 10.6% respectively. % and 13.3%. Advanced Micro Devices (AMD) surpassed Micron this year, registering an increase of 65.9%. The VanEck Vectors Semiconductor (SMH) ETF has grown about 37.5% since the beginning of the year.
Why Cramer is betting on the Micron stock? Let's see what the company could report when it publishes its fourth quarter results on September 26th.
Micron strengthens inventories due to improved chip demand
Since last year, Micron has seen a low demand for its DRAM (Dynamic Random Access Memory) and NAND (AND Negative) memory chips. Declining demand in the smartphone and server markets and trade tensions have led to a decline in chip demand. Slowing demand, combined with lower memory prices, reduced Micron's profits.
However, the flea market is improving now. Micron's actions are gaining momentum as demand for chips is expected to grow. In the third quarter of fiscal 2019 (ended in May), the price of Micron chips increased only marginally, and the Company disposed of its excess inventory. With the chip market improving, Micron now expects demand for DRAMs to return to marginal growth in the second half of this year and stabilization of the NAND market.
What to expect from Micron in Q4
Based on forecasts of higher chip shipments in the fourth quarter, we believe that Micron may exceed analysts' average expectations. Mark Delaney, Goldman Sachs analyst, agrees.
In the fourth quarter, Micron expects a sequential decline in its profit and its business figure of 57%. The company has forecast a gross margin of 27.5% to 30.5%, thanks to lower prices for memory. Analysts also expect Micron sales to drop 45.9% year-on-year (year-over-year) and 4.7% year-on-year. They expect a fall in profits of 86.3% year-on-year and 54.3% sequentially.
Bullish analysts on Micron stock
Several analysts have raised their ratings and price targets for the Micron stock as they anticipate a pickup in demand for chips next year. JPMorgan Chase said last Friday its price target for Micron shares, because it expects an improvement in NAND prices in the short term. Goldman Sachs also raised the Micron price target last week. Analysts at Longbow, KeyBanc, Susquehanna Financial and Mizuho Securities are all optimistic about the Micron stock.
Trade negotiations could also benefit Micron
The evolution of trade between the United States and China could drive up the price of Micron action. On Friday, Donald Trump reportedly exempted 437 Chinese products from customs duties he imposed last year. It also postponed to October 15 its tariffs of 30% on Chinese products. On September 11, China's Ministry of Finance announced the exemption of 16 US tariff products. Mid-level trade officials have also resumed trade talks, which suggests a favorable trade deal in October. An American-Chinese truce is essential for Micron, whose main client is China.
Analyst recommendations and technical indicators
Of the 34 analysts covering the Micron stock, 21 suggest "buy", ten suggest "keep" and three suggest "sell". The relative strength index of Micron for 14 days is 61.2, suggesting that investors are generally neutral but prefer to "buy" the stock. On September 23, Micron's shares closed at $ 47.94 close to the Bollinger mid-band, implying that they are neither overbought nor over-sold. According to its technical indicators and Cramer's comments, Micron's stock seems to be gaining popularity.
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