Micron Stock Price Forecast September 2021 – Time to Buy MU Stock?
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Micron (MU) stock was trading over 3% lower in US premarket price action today. The stock is down over 1% for the year even as the broader markets are up in double digits. What’s the forecast for MU stock and should you buy the dip?
Notably, chipmakers have whipsawed in 2021 even as the global chip shortage is seen extending into the next year. Micron stock peaked near $96 in April but tumbled to $70 in August.
Micron stock latest news
MU released its fiscal fourth-quarter earnings yesterday after the close of markets. The company reported revenues of $8.27 billion in the quarter which were slightly higher than what analysts polled by TIKR were expecting. In the fiscal fourth quarter of the fiscal year 2020, the company had posted revenues of $7.42 billion. In the full fiscal year, the company posted revenues of $27.7 billion, which was a new record and was 29.2% higher than the previous year. The company’s EPS of $2.42 was also ahead of the $2.33 that analysts were expecting.
Micron CEO Sanjay Mehrotra said that the company’s “outstanding fourth quarter execution capped a year of several key milestones.” He added, “In fiscal 2021, we established DRAM and NAND technology leadership, drove record revenues across multiple markets, and initiated a quarterly dividend.”
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MU dividend
Last month, Micron had initiated a dividend and announced a quarterly dividend of 10 cents per share. “Initiating a common stock dividend reflects our confidence in Micron’s future and our commitment to creating compelling value for shareholders,” Mehrotra had then said. Meanwhile, the stock’s dividend yield is only about 0.55% which is way below that of the S&P 500 as well as fellow chipmakers like Intel.
Why is Micron stock falling?
Meanwhile, while Micron reported better-than-expected earnings, the stock was trading lower. The anomaly could be attributed to the company’s guidance which was below expectations even as Mehrotra said that “the demand outlook for 2022 is strong.”
In the fiscal first quarter of 2022, Micron expects to post GAAP revenues between $7.45-$7.85 billion. The guidance fell well short of the $8.57 billion that analysts were expecting. Also, the company’s adjusted EPS guidance of $2-$2.10 was below the $2.56 that analysts were expecting. The lower guidance is attributable to tepid demand from the PC industry that has been grappling with a shortage of components which is taking a toll on production. PC makers have said that they are constrained by supply and are practically able to sell every PC that they can manufacture.
PC demand growth
Meanwhile, while the pandemic-fuelled growth in the PC industry is not sustainable, most analysts believe that the industry should settle at a higher shipment level than it did before the pandemic. The pace of digitization has increased during the pandemic and the demand growth for PCs might be higher over the next decade as compared to what we’ve seen in the last decade.
MU stock forecast
Of the 32 analysts covering MU stock, 28 have rated it as a buy while four rates it as a hold or some equivalent. None of the analysts has a sell rating on the stock
Micron has a median price target of $109, which is a premium of 48.9% over current prices. Its highest price target of $165 is a premium of 125% over current prices, while its lowest price target of $75 is a 2.5% premium over the current share price.
Notably, analysts have been gradually lowering their target price on Micron stock. In September only, Citi had lowered MU’s target price from $135 to $120 while Raymond James had lowered its from $120 to $100. BMO Capital Markets, JPMorgan Chase, Mizuho, and KeyCorp are among the other brokerages that have lowered Micron’s target price in September.
Goldman Sachs on MU stock
Goldman Sachs was anticipating a muted guidance from MU and had reiterated it as a buy last week. “We believe near-term weakness, particularly in the PC end market, combined with the company’s possible decision to re-build inventory on its balance sheet (thus limiting bit shipments to customers) and its tendency to guide conservatively could lead to a muted FY1Q outlook relative to current Street expectations,” it had said in its note.
MU stock long term forecast
The long-term forecast for Micron stock looks positive. The company has ramped up its capex budget and is working to offer innovative products to customers. Currently, the stock has been weighed down by the weak pricing for DRAM which accounts for the bulk of its revenues.
Should you buy Micron stock?
Micron stock looks a good buy looking at its tepid valuations. The stock trades at an NTM (next-12 months) PE of 7.3x which seems to be quite attractive considering the risk-reward dynamics. However, the stock looks weak technically and has failed to cross above the 50-day SMA (simple moving average) despite multiple attempts. MU stock needs to cross above the 50-day SMA to signal a technical uptrend.
Bulls would have expected the stock to rise above the 50-day SMA after the earnings but the contrary seems to be happening and the stock is sliding after providing soft guidance. However, the stock should eventually recover as markets discover the value in this beaten-down chip stock.
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