Is this the best time to enter Micron Technology, Inc. (NASDAQ:MU) stock? Here’s all to know about Micron Technology, Inc. to play MU stock better.
Micron Technology, Inc. (NASDAQ:MU) stock is now up by a whopping 132% since its lows last May. MU stock is now trading above $22, as it clearly has garnered momentum from its first fiscal quarter of 2017. Investors have really been in the face of the management for several quarters now with respect to getting this company back into profit as soon as possible. Well, Micron managed to do that in Q1 posting a net income of $180 million for the quarter. The positive earnings (1) came mainly on the back of better pricing in DRAM as well as margin improvement due to the ongoing shift from planar NAND processors to 3D NAND flash.
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Investors are definitely monitoring with enthusiasm the perceived favorable supply/demand situation for memory chips in 2017 which on the surface looks bullish for Micron. In fact, with Micron continuing to be heavily exposed to DRAM, prices in this market are expected to rise by up to 25%. Credit Suisse is expecting demand to spike by 29% whereas it expects supply to inch up only by 18%. Micron (although pivoting) still earns most of its revenue from the DRAM market.
These supply/demand numbers are bullish for Micron for fiscal 2017 but there is a risk that the likes of SK Hynix & Samsung Electronics (OTC:SSNLF) could add to the demand which would suppress prices in the market. In my opinion, the easy money has been made in Micron. Yes, MU Stock could easily rally another 20 to 30% from its current levels but I fail to see how the stock will reproduce its spectacular performance from the past 8 months or so.
If China Gets Serious About Home Grown Chip Manufacturing – It Would Adversely Affect Micron
If I was heavily long on this stock, one area that would definitely be worrying me at present would be the position of the Chinese. China wants to change the paradigm with relation to importing the vast majority of semiconductors for its market. In fact, it has announced a $160 billion fund with the aim to make China self-sufficient in the semiconductor market. Basically, China wants to get its hands on as much intellectual property as possible in order to manufacture semiconductors at scale in their own country. In fact, the US government blocked a proposed takeover of Micron in 2015 but the Chinese don’t look like they are ready to back down. The risk to Micron shareholders is this.
If China gets fed up of US government interventions (with relation to investing or acquiring US companies in this space), China could easily shut down its market to US suppliers. In fact, it already has a stipulation that foreign manufacturers must manufacture in China in order to gain access to its market. China, by far, is the biggest semiconductor market in the world but now it wants far more of the pie. If they do succeed in manufacturing their own chips, it would result in downward pressure on pricing over time. This would not be bullish for Micron going forward.
