Micron Technology shares on Friday were on track for their best day since 2020 after an analyst at Evercore ISI added the memory chip maker to his list of top stock picks. He argued investors could pour into Micron, anticipating a return to earnings growth next year.
Micron stock (ticker: MU) was up 8.4% to $83.52 in Friday afternoon trading. Shortly before 3 p.m., it was the day’s second-best performer in the S&P 500 index, which was down slightly.
Evercore ISI analyst C.J. Muse wrote in a note on Friday that though shares of memory chip makers like Micron have lagged behind the PHLX Semiconductor index, or SOX, since early June, he thinks the tides are shifting.
“We believe negative sentiment was due to investor concerns over the sustainability of PC, handsets, and cloud demand, which was also compounded by DRAM spot pricing that began to flatten out in May/June 2021,” Muse wrote.
Muse notes that Wall Street’s expectations for Micron’s February and May quarter earnings have been cut by about 33% and 31%, respectively, since the start of August. While he thinks there could be further downside, weakness is now priced in. He thinks either the February or May quarter will likely be a bottom for Micron’s earnings, depending on how supply shortages shake out. Given Micron shares tend to outperform one to two quarters before a bottom in earnings, he thinks the stock could begin a run soon.
“And once they do—we think the stock action could be fast,” Muse wrote. “We also note most investors expected the memory trade to begin to work in 1Q22 based on our investor survey last month and would not be surprised to start seeing investors look to get positioned in the name ahead of January 1st, 2022.”
Indeed, some traders clearly took Muse’s advice to heart, given the stock’s jump on Friday. Shares of Lam Research
(LRCX), another new top pick from the analyst, rose 1.3%, as well.
Write to Connor Smith at [email protected]
