(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)
Micron Technology Inc. (MU) shares could be heading to prices not seen in about 18 years, to nearly $73. Should the stock reach such lofty levels, it would be the first time since the year 2000, but it would take a rise of about 19% from its current price of $61.35 to get there. The stock may have a good shot at getting there based on technical analysis, options betting and analyst forecasts. (For more, see also: Micron Reports Earnings Against Its All-Time High.)
The stock has already climbed by about 125% over the past three years, versus the S&P 500's rise of only 28%. The increase in the stock has been fueled by strong revenue and earnings growth, with earnings expected to climb to $11.56 per share in 2018, from just $0.06 per share in 2016, and astronomical rise. Meanwhile, revenue has forecast to jump $29.86 billion, up from $12.4 billion, an increase of about 140%.
The technical chart tells the story of a stock about to breakout, closing right at a technical resistance level at $61.50. Should shares successfully rise and close above technical resistance it would signal a technical breakout, clearing the way for a rise significantly higher. The next level of significant resistance would come at $73.35. The last time the stock was at that price was in the summer of 2000 when Micron shares were plunging lower from the bursting of the technology bubble.
Options traders are betting shares of Micron rise as well by expiration on July 20 using the $65 strike price. The calls cost about $3.20 per contract, giving a buyer of the calls a breakeven price of about $68.30, a jump of about 11% from the current price. But the long straddle options strategy suggest shares of the stock rise or fall by about 15% from the $60 strike price, placing the stock in a trading range of roughly $51 to $69. But the calls outweigh the puts by a ratio of about 6 to 1, with approximately 54,000 open call contracts to only 9,500 put contracts, suggesting the bets are on the stock to rise. (For more, see also: Micron to Gain on Strong NAND-DRAM Trends.)
Analysts are bullish on Micron as well, and see the stock rising to about $75.50, based on the average analyst price target, according to data from YCharts, a rise of about 23%. Of the 32 analysts covering the stock, 81% rate the stock a "buy" or "outperform," while only 6% rate shares an "underperform" or "sell."
Should Micron be successful in breaking out above resistance, the stock will go on a historic rise to prices last seen when the technology bubble of 2000 was bursting.
Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.