Micron stock price is firing on all cylinders: buy or sell?

Micron stock price has been in a strong rally this year and is now hovering at its all-time high. MU has jumped in the last three consecutive weeks and by over 11,000% from the lowest level in 2010. A $1,000 investment in the company in 2010 would now be worth over $65,000. 

AI tailwinds are continuing

Micron and other traditional technology companies like Western Digital and Seagate Technology are firing on all cylinders this year, helped by the ongoing AI tailwinds. 

Most analysts believe that the industry has more room to run in the coming years. For example, OpenAI has achieved a $500 billion valuation, making it the most valuable private company globally. 

In a recent report, Citi predicted that data center spending by hyperscalers would jump to $2.8 trillion by 2028. Other companies like McKinsey and Bain have published similar reports.

This AI spending will mostly benefit companies like Micron that provide solutions in the industry. It will also benefit top infrastructure companies like Nebius and CoreWeave that are providing on-demand computing solutions to companies in the industry.

These companies have reported major deals in the past few years. For example, CoreWeave inked a $14 billion deal with Meta Platforms this week, while Nebius reached a $17 billion deal with Microsoft. 

MU growth is accelerating

The most recent results showed that Micron’s business is doing well. Its revenue jumped by 22% QoQ in the fourth quarter to $11.3 billion. This was a whopping 46% increase from the same period last year.

Micron is benefiting from the ongoing demand in the Dynamic Random Access Memory (DRAM) industry. DRAM is a volatile memory used in computers to temporarily store data that the CPU needs quickly. 

Its DRAM business made $9 billion in revenue. NAND, its other core business, made $2.3 billion in revenue during this time. Most of the revenue was in the cloud memory division, followed by core data, mobile and client, and auto and embedded. 

Most importantly, analysts are optimistic that the company’s revenue growth will accelerate in the coming quarters. The average estimate among analysts is that its revenue will be $12.5 billion in the current quarter, a 43% YoY increase. 

Analysts also see the next quarter’s revenue growing by 60% to almost $13 billion. Its annual revenue in the next two financial years will be $53 billion and $57 billion, respectively. 

Therefore, there are signs that Micron is severely undervalued as it has a forward P/E ratio of 10 and a trailing multiple of 20. 

Micron stock price technical analysis

The weekly chart shows that the Micron stock price has rebounded in the past few months. It has jumped from the April low of $61 to a high of $182 today. 

The stock moved above the important resistance level at $156, its highest point on June 17. This was a notable level as it was the upper side of the cup-and-handle pattern, one of the most common bullish continuation signs in technical analysis.

Micron share price has jumped above the 50-day and 100-day Exponential Moving Averages (EMA). Also, the Relative Strength Index (RSI) and the MACD have continued rising. 

Therefore, the stock will likely continue rising as bulls target the important resistance at $200. The bullish Micron stock forecast will become invalid if it drops below the support at $156.

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