- Micron Technology shares rose more than 4% during Tuesday's session after Citi upgraded the stock from Sell to Buy with a $100 price target.
- Analyst Christopher Danley believes that the DRAM market will experience an upturn and drive Micron earnings over the coming year or two.
- Last month, Bloomberg reported that Samsung Electronics Co., Ltd. (SSNLF) and SK Hynix, Inc. (000660.KS) would not raise capital spending on DRAM in the New Year.
Citi analyst Christopher Danley believes that the long-awaited upturn in DRAM is about to materialize and drive Micron earnings (and the stock price) higher. While the stock has already experienced a significant rise, Danley still sees plenty of upside potential since DRAM bull markets typically last two years and supply/demand looks favorable over at least the next year.
In late December, Bloomberg reported that Samsung Electronics and SK Hynix would not raise capital spending on DRAM in 2021. The move boosted both Micron Technology and Western Digital Corporation (WDC), which both have sizeable exposure to the DRAM market that Citi analysts believe will experience an upturn in the near term.
From a technical standpoint, the stock moved to re-test its highs during Tuesday's session. The relative strength index (RSI) moved back into overbought territory with a reading of 73.30, but the moving average convergence divergence (MACD) could see a bullish crossover. These indicators suggest that the stock could see some consolidation, but the intermediate-term trend remains bullish.
Traders should watch for consolidation above prior highs of around $74.30 over the coming sessions. If the stock breaks down, traders could see a move to trendline support at $70.00. If the stock rebounds higher, traders could see a move toward fresh highs, which seems to be the more likely scenario over the intermediate term given the improving fundamentals.
The Bottom Line
Micron Technology shares rose more than 4% during Tuesday's session after Citi upgraded the stock from Sell to Buy with a $100 price target. While the stock has already seen strong gains, analyst Christopher Danley believes that the long-awaited upturn in DRAM could drive earnings and the stock price even higher from these levels.
The author holds no position in the stock(s) mentioned except through passively managed index funds.