| Sector Focus Micron Rides the Cloud Up, Up, and Away |
March 8, 2018 3:17 p.m. ET
Shares of Micron Technology (MU) are heading higher today, as analysts see better earnings ahead for the stock, amid a strong backdrop for semiconductors in general.
Illustration: Micron Technology
Micron has gotten plenty of love lately from Wall Street, which expects it to go from follower to leader in the storage space. The company got a new chief financial officer last month, which, along with upbeat earnings, has helped the stock climb more than 33% since the start of year.
Needham analyst Rajvindra Gill attributes the strength in Micron to Dell's recent upbeat commentary, which looks good for the sector in general. Micron and its peers are benefiting from increasing demand for memory "both via expanding markets but also through increasing densities," he writes, meaning it's not just a short-term bump from supply-demand dynamics.
Others agree. Keybanc's Weston Twigg reiterated an Overweight rating and raised his price target on Micron to $65 from $53, writing that memory markets are very healthy and that price declines won’t be as drastic as he previously thought over the next two to three quarters.
Morgan Stanley's Katy Huberty takes a look at the rapidly increasing spending on the cloud today. She estimates that 2018 capital expense growth for cloud will rise 28% this year, up from 23% and 24% in 2016 and 2017, respectively, marking the highest growth rate since 2014. Micron stands to be one of the main beneficiaries of this trend—along with other names including Arista Networks (ANET) and Seagate Technology (STX)—leading Huberty to assign an Overweight rating on the stock.
Mircon is up 2.3%, to $55.19, in late-afternoon trading, while the Technology Select Sector SPDR ETF (XLK) is up 0.36%, to $69.15.