shares on Friday were heading for their best day since 2020, after an analyst at Evercore ISI added the memory chip maker to its list of best stock picks. He argued that investors could pour into Micron and expect a return to earnings growth next year.
Micron stock (ticker: MU) rose 8.4% to $ 83.52 in Friday afternoon trading. Shortly before 3pm, it was the day’s second best performer in
the index, which fell slightly.
Evercore ISI analyst CJ Muse wrote in a note Friday that while stocks from memory chip manufacturers like Micron have lagged behind the PHLX Semiconductor index or SOX since early June, he believes the tide is changing.
“We believe that negative sentiment was due to investors’ concerns about the sustainability of PCs, handsets and cloud demand, which was also reinforced by DRAM spot prices that began to flatten out in May / June 2021,” Muse wrote.
Muse notes that Wall Street’s expectations for Micron’s quarterly earnings in February and May have been cut by around 33% and 31% respectively since the beginning of August. Although he believes there may be additional disadvantages, weakness is now priced in. He believes that either the February or May quarters are likely to be a bottom for Micron’s earnings, depending on how the supply shortage shakes out. Given that Micron shares tend to outperform one to two quarters before a bottom level in earnings, he believes the stock may soon start to run.
“And once they do – we think the stock action could be quick,” Muse wrote. “We also note that most investors expected the memory trade to start operating in Q1 22 based on our investor survey last month, and they would not be surprised to start to see investors appear to be positioned. in the name before January 1, 2022. “
In fact, some traders apparently took Muse’s advice, given the stock’s jump on Friday. Shares of
(LRCX), another new top choice from the analyst, also rose by 1.3%.
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