Micron leads chip stocks higher as earnings show memory maker ‘does more with less’

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Shares of Micron Technology Inc. led chip stocks higher Thursday after the memory chip maker’s strong quarter overcame manufacturing concerns and earned praise from a strong chorus of analysts. The Boise, Idaho-based chipmaker beat Wall Street‘s expectations in its quarterly results and outlook Wednesday afternoon, but analysts began to question whether Micron’s $ 9 billion in capex was enough given. the global shortage of chips and the facilities that make them. Micron scrapped plans to build capacity in 2019 following massive oversupply issues in the wake of an earlier boom in memory demand.

Opinion: There is still a huge demand for memory chips, so what is Micron doing about it? Investors pushed Micron MU shares, + 4.86% to $ 95.75 at the beginning of Thursday’s session, 8.5% more than Wednesday’s close, as at least 21 of the 34 analysts tracking the shares raised their price targets, according to FactSet. Chip stocks forged ahead amid hopes that President Biden‘s infrastructure plan will boost chip manufacturing in the US During a widespread shortage, and the PHLX SOX semiconductor index, + 2.70%, gained 2.8%. . Evercore ISI analyst CJ Muse, who has an outperformance rating and a $ 135 price target, said Micron’s shortages and disciplined capex were causing a perfect storm “in a good way.” “Investors are long, expectations were high, and Micron delivered,” Muse said. “It‘s hard to see problems going forward, especially considering tight inventories at Micron’s customers, as well as equipment slots that are largely full through 1H22.” Muse said that “considering the current shortage situation and disciplined capex, it’s hard not to see this cycle last longer than previous cycles.” See also: Semiconductor stocks are getting a boost from Biden’s big spending plan, Mizuho analyst Vijay Rakesh, who has a buy rating on Micron and a price target of $ 104, said the company was positioned for a stronger 2021 and focused on a late Wall Street Journal report. On Wednesday both Micron and Western Digital Corp. WDC, + 5.81% are considering offers for Japanese NAND maker Kioxia Holding Corp. in the $ 30 billion range. “We believe that any consolidation would be very positive for the memory industry and specifically for the stability of the oversupplied NAND market, as it could generate significant pricing power and leverage, especially in a context of impending shortages.” Rakesh said. NAND chips are the flash memory chips used in smaller devices like smartphones and USB drives, as opposed to DRAM, or dynamic random access memory, which is the type of memory commonly used in PCs and servers. While DRAM chips are in short supply, NAND chips, on the other hand, are still trying to recover from oversupply issues. For more: The global chip shortage is expected to last into next year, and that’s good news for semiconductor stocks, Cowen analyst Karl Ackermann, who has an outperformance rating and a $ 105 price target. said Micron is “doing more with less.” “Prudent capacity planning is now paying off and is clearly evident from the improvement in prices and margins,” Ackermann said. “NAND consolidation is not necessary for MU, but consolidation would be a headwind for suppliers.” “We believe that many investors were looking for an upwardly revised investment guidance given the ‘severe supply shortage’ of DRAM, which is putting upward pressure on prices,” Ackermann said. Of the 34 analysts covering Micron, 29 have buy or overweight ratings and five have retention ratings. Of those, 21 raised their price targets to an average target of $ 117.93, up from $ 114.86 previously, according to FactSet. In the past 12 months, Micron shares have gained 135%, compared to a 124% increase for the SOX index, a 62% increase for the S&P 500 SPX index, + 0.83% and an increase of 83%. Nasdaq COMP Composite Index, + 1.68%.