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Micron: A Strong 'Buy' Candidate For 2012

March 27, 2012 | About:
Technology stocks often are recognized to have assisted many investors in achieving great financial success. While this opportunity has been achieved by a few, there have been times when many shareholders have lost their money due to the lack of details concerning some technology investments. To help in limiting the risks of these investments the following is an analysis of a technology stock to “buy” now. This is a stock with superior earnings and a strong possibility for stock price hike.

Sterne Agee Reiterates Buy:

Micron Technology (MU) stock had its “buy” ranking reiterated by equities research analysts at Sterne Agee in a research note released to investors on Monday. They presently have an $11.00 price target on the shares.

Also, analysts at MKM Partners upgraded their price target on shares of Micron Technology from $9.00 to $11.00 in a research note released to investors on Friday. They currently have a “buy” ranking on the stock.

Furthermore, analysts at Deutsche Bank hiked their price target on shares of Micron Technology to $8.00 in a research released note to investors on Monday, February 13. In addition, analysts at Piper Jaffray upgraded their price target on shares of Micron Technology from the previously held target of $7.00 to $10.00 in a research note released to investors on Monday, February 13. They currently have an “overweight” ranking on the stock.

Before Buying Micron You Must Know:

Micron Technology has a market capitalization of $8.60 billion. On a latest declaration by newly hired CEO Mark Durcan, besides traders' expectations, sent the price from $7.82 to $8.28 as of this writing. Revenue during the previous five years has increased at a yearly growth rate of 10.76%.

Earnings per share remained at a loss of $0.18 to trailing months. Additionally, the most recent quarter debt to equity ratio stands at 0.26, which suggests the company has been very hostile in using debt to finance operations. Even though this is the case, the stock has been on an optimistic trend since October 2011. Management is gradually making a turnaround in managing debt and expenses. Therefore I believe the stock is steadily on its way back to trading back near to $11.

To conclude, I believe right now is a good time to buy some shares of the firm to take benefit of the stock's appreciation as top officials enhance the management of the business.

Previous Quarter Performance:

Micron Technology, the biggest US manufacturer of computer-memory chips, announced its second successive quarterly loss as prices dropped amid lackluster demand for PCs.

The Boise, Idaho-based company stated in a statement recently that the net loss came in at $187 million, or $0.19 per share, against net income of $155 million, or $0.15, a year formerly. Revenue in the first quarter closed December 1 dropping 7.2% to $2.09 billion. Analysts on average projected a loss of $0.08 on sales of $2.12 billion, in accordance with data compiled by Bloomberg.

The average worth of Micron’s dynamic random access memory, or DRAM, which gives the main memory in PCs, dropped 12% in the quarter and has slipped an additional 20% so far in the existing period, the company stated. Floods in Thailand have left PC manufacturers short of hard-disk drives, leading them to cut purchases of other elements. That has resulted in a 10% to 15% decline in DRAM orders, Micron stated.

Micron’s Competitor in Bankruptcy:

Micron Technology Inc., the biggest US maker of computer-memory chips, increased the most in two months on February 27, 2012 following Japan-based competitor Elpida Memory, when they filed for bankruptcy.

Micron rose 7.7% to around $8.50, for the largest intraday percentage rise since December 22.

Kevin Cassidy, a Stifel Nicolaus & Co. analyst, stated that Elpida, the last Japanese manufacturer of dynamic random access memory, or DRAM chips, submitted for bankruptcy following semiconductor prices dropping and it remained unsuccessful to win a second government bailout. Although there’s too much volatility in the DRAM market, Micron could purchase some of Elpida’s facilities and transform them to make Nand flash, the chips utilized in mobile phones and tablets.

Cassidy, a New York-based analyst, commented on Elpida’s bankruptcy filing that the main thing it does, is indicate to the market that prices for DRAM need to increase. He further stated that PC manufacturers have been taking advantage of the DRAM industry which is selling products at less than its cost. He also recommends buying Micron shares.

He stated in a telephone interview recently that though Boise, Idaho-based Micron does not need to purchase any of Elpida’s assets, Nand flash exhibits a “higher growth” prospect.

Competitors Comparison:

Other competitors include Intel (INTC) and Applied Materials (AMAT). Let’s have a look on some key financial indicators of them and then I will compare them with Micron Technology.

Intel current price remained close to $27.50 with a market capitalization of $137.34 billion. It has price to earnings ratio of 11.50 and forward price to earnings stayed at 10.49.

Looking at Applied Materials, its current price is around $12.50 with a market capitalization of $16.14 billion. It has price to earnings ratio of 10.75 and forward price to earnings stayed at 11.06.

Comparing them with Micron, it has current a price of around $9.00 with a market capitalization of $8.39 billion. Its forward price to earnings stayed at 16.02. Micron has the greater forward price to earnings than the other two, which shows that it has the potential of a price hike, so “Buy” the stock and expect $12.50.

Analysts Mean Recommendations:

Analysts mean recommendation on the stock is 1.9 which is inclined to “Buy” with a gauge (Strong Buy) 1.0 - 5.0 (Sell). Currently the Micron stock is trading around $8.70, however the stock is behind its median price target of $10.00 according to 26 brokers polled by Yahoo Finance. This may be a reason that can draw investors’ attraction. The stock had traded in a very narrow range of $3.97 - $11.89 over the past 52 weeks. I also recommend buying the stock as it has already claimed the median target in twelve months and is still behind its high target of $12.50.

About the author:

Dividend King
I am primarily an investor interested in creating passive income streams through dividends. I focus on finding and analyzing dividend paying stocks, MLPs and REITs that are a good fit for income investors.

I practice Judaism and my faith is very important to me. I visit family in Israel once a year, but I am educated and work in the United States where I hold an MBA and a bachelor’s in English. I am a patient man, enjoy wine but am not a connoisseur, and I listen more than I speak.

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