Shares of Micron Technology Inc. (MU) are trading up about 6.4% at $44.31 on Tuesday afternoon, on track for their highest close since August 2011 after rival Samsung Electronics reported third-quarter results indicating continued strength in the DRAM and NAND chip markets. (See also: Micron to Become Net Cash Positive by 2018: UBS.)
South Korean consumer electronics giant Samsung expects a tight supply of DRAM and NAND flash chips to continue into next year, translating into higher prices and profits for both semiconductor manufacturers. Samsung attributed a near 200% increase in Q3 operating profit over last year and revenue up 30% year-over-year (YOY) to strong demand for its memory chips as it plans to spend as much as 75% of its $26.2 billion in semiconductor spending on memory chips.
Demand > Supply Throughout 2018
Analysts note that investment in chips by Samsung looks to be taking a back seat to the dividend, which is expected to double in 2018. Stifel Nicolaus analyst Patrick Ho indicates that while investors may be concerned over significant capex targeting memory, he expects demand to continue to outweigh supply. As for 3D NAND, this trend should hold throughout all of 2018 and possibly 2019 as well, he added.
In September, Micron stock surged on earnings that blew past Street expectations. Shares have rallied 102.1% year-to-date (YTD) versus the S&P 500’s 15.1% increase over the same period. The PHLX Semiconductor Index has climbed about 40% YTD
The Boise, Idaho-based chipmaker is slated to reported its fiscal first quarter results on Thursday before market open. Last week, rivals Intel Corp. (INTC) and Advanced Micro Devices Inc. (AMD) posted revenue and earnings above the consensus estimates. Analysts at Needham, some of the biggest MU bulls, recently upped their price target to $76, compared to the average on the Street at $50.72. (See also: Micron Set to Double After Q4 Beat: Analysts.)