Micron (MU) is among the leading memory-makers in the market. As such, this stock’s incredible surge over the past few months has started to catch the attention of many investors, for good reason.
I’ve touched on Micron’s incredible rise a number of times in the past. However, with recent volatility now reshaping expectations around how this stock may perform moving forward (given increased attention around this name), I think it’s fair to say that most market participants now find them on one side of this trade or another.
Let’s dive into some interesting recent analysis put forward by analysts at BP Paribas, who are still bullish on MU stock despite the incredible four-fold surge we’ve seen thus far this year. Here’s the bull case behind why this particular company could have much further upside potential from here.
Micron’s past surge has a lot to do with increasingly beneficial supply and demand dynamics for memory makers. An integral piece of the artficial intelligence (AI) supply chain, computing providers need an incredible amount of memory to run their central processing units (CPUs) and graphics processing units (GPUs), meaning that surging chip demand has led to outsized growth in memory demand, which many top suppliers like Micron have struggled to keep pace with.
Thus, as chip demand continues to soar, and investors look for the most profitable angles from which to play the surging demand we’re seeing unfold, memory-makers like Micron should be well-positioned to continue growing their top and bottom line numbers at a considerable rate.
With BNP analysts noting that NAND prices are estimated to “increase 55% Q/Q, followed by 5% Q/Q increase in CQ2 predominantly driven by supply-side dynamics as NAND suppliers continue to shift capacity to enterprise storage products while remaining prudent on capacity additions.” That’s a big deal.
What that ultimately means for Micron moving forward is that market participants are likely to price in higher margins over time. And for a company with a profit margin that’s approaching 23%, that’s going to be a good thing for investors.
