Micron Technology is a company that specializes in producing semiconductors and other memory technologies. ( MU 3.05% ) The stock price increased by 1.5% by 10 a.m. ET on Wednesday following a vote of confidence from an investment bank for the computer memory manufacturer (DRAM and NAND). Citigroup .
Citi maintained its positive recommendation on Micron and restated its price target of $175, which may not appear particularly impressive. However, the current price of Micron stock is just $99.
If Citi’s prediction is accurate, then it suggests that Micron’s stock could potentially increase by over 75%.
Reasons why Citigroup favors Micron shares
Citi’s report discusses the favorable and unfavorable aspects concerning Micron. Unfortunately, the analyst acknowledges a surplus of DRAM products accumulating in the PC distribution network. Consequently, Citi reduced its revenue projection for Micron in 2024 slightly by 1% to $25.1 billion. Additionally, the analyst decreased its earnings estimation by a more substantial 7% to $0.61 per share.
Despite reducing their forecasts for fiscal 2025, Citi anticipates an increase in DRAM prices. They predict that Micron will achieve $38 billion in sales next year, with profits of $9.89 per share instead of the previously estimated $10.17.
Even if the price per share were $9.89, it would still be… fantastic Citi projects that Micron’s earnings for this year will show a significant increase of 1,520% compared to the previous year.
Should investors consider purchasing Micron stock?
When taking into account the fact that Micron operates in a highly volatile and extremely cyclical market, the value of a 15x earnings growth may vary. semiconductors In an industry where fluctuations in profits are common, Citi values it at around 15 times earnings, as reported by StreetInsider.com. On the other hand, Micron’s stock is currently priced at slightly more than 11 times the anticipated earnings for the next year, according to most analysts.
The cost doesn’t seem high to me. However, investors in Micron must understand that investing in this industry is highly challenging. Despite Micron being currently unprofitable, there is no guarantee it will remain so in the future. Additionally, even if Micron becomes profitable next year, it doesn’t ensure its profitability in the following year.
Investor beware.
