Micron Technology Inc. (MU) ended 2020 at a 20-year high above 75, booking an impressive 40% annual return. It’s the first chip manufacturer to report earnings in January, with Q1 2021 results set for release after Thursday’s closing bell. Wall Street analysts now expect the memory giant to book a profit of $0.67 per-share on $5.63 billion in revenue. If met, earnings-per-share (EPS) will mark a 39% profit increase, compared to the same quarter in 2020.
Buy The Pullback
The stock is still trading more than 20 points below the Internet bubble peak posted in the summer of 2000. The vast majority of chip stocks have cleared that formidable barrier, highlighting more than a decade of sub-par performance. However, it’s now engaged in a strong uptrend after mounting June 2018 resistance in the mid-60s and pullbacks should mark buying opportunities as the rally works through the last pockets of overhead supply.
Cowen analyst Karl Ackerman raised his target from $75 to $80 in December, noting, “we raised our estimates and expected a beat-and-raise following MU’s Technology Roadmap, but the company subsequently articulated an even stronger outlook than we expected. We’re raising our target to $80 as we true-up our model on higher numbers. Demand has improved, inventory days should recede, and limited capex investments (particularly in DRAM) should tighten supply and demand.”
Wall Street and Technical Outlook
Wall Street consensus brightened considerably in 2020, lifting to a ‘Strong Buy’ rating based upon 17 ‘Buy’, 1 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $35 to a Street-high $100 while the stock closed Friday’s session and 2020 about $4 below the median $79 target. This humble placement should support additional upside in the first quarter, especially if the company beats top and bottom line expectations this week.
Micron sold off after a multiyear uptrend stalled in the 60s in 2018, finding support in the upper 20s at year’s end. It rallied within a few points of the prior peak in February 2020 and collapsed with world markets, reversing just three points above the prior low in March. Buying interest then surged, generating a strong recovery wave that mounted resistance in November. Price action added another 10 points through December, setting the stage for a strong start to 2021.
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Disclosure: the author held no positions in aforementioned securities at the time of publication.