Micron ( MU ) is one of the leading memory manufacturers in the market. As the spectacular rise of this stock over the past few months has caught the attention of many investors for good reason.
I have mentioned the incredible rise of Micron many times in the past. However, with the recent volatility now aligning with expectations of how this stock will fare (giving more attention around this name), I think it’s fair to say that most market participants now find themselves on the side of this trade or the other.
Let’s take a look at some interesting recent analysis presented by analysts at BP Paribas, who have still seen MU stock rise this year despite an incredible four-fold increase. Here’s a bull’s-eye case for why this particular company could have much higher potential from here on out.
Micron’s previous surge has a lot to do with increasingly profitable supply and demand dynamics for memory makers. An integral part of the artificial intelligence (AI) supply chain, PC vendors need incredible amounts of memory to run their central processing units (CPUs) and graphics processing units (GPUs), meaning that increased chip demand has led to massive growth in memory demand, which many top suppliers such as Micron have struggled to keep up with.
Thus, as chip demand continues to increase, and investors see more profitable angles from which to play the growing demand we’re seeing, memory makers like Micron should be well positioned to continue to increase their top and bottom line numbers at a significant rate.
BNP analysts note that NAND prices are expected to “increase 55% Q/Q, followed by a 5% Q/Q increase in CQ2 driven primarily by supply-side dynamics as NAND suppliers continue to shift capacity to enterprise storage products while remaining cautious on capacity additions.” This is a big deal.
What ultimately means for Micron going forward is that market participants are likely to price in higher margins over time. And for a company with a profit margin approaching 23%, that would be a good thing for investors.
