Micron (NASDAQ: MU) shares have had a heck of a good start to 2021.
The chipmaker is up 10% in the last week following better-than-expected fiscal first quarter earnings results, and an upgrade from Citigroup analyst Christopher Danely from Sell to Buy.
Danely also boosted his price target on Micron shares from $35 to $100—26% higher than the price as of this writing—and wrote that the upgrade was “based on our belief that the long-awaited upturn in DRAM (68% of fiscal 2020 revenue) is about to materialize, which should drive upside to Micron [earnings per share] and stock.”
Micron shares have gained more than 60% over the last three months, “and is trading at a higher valuation than at any time during the previous upturn,” Daley said, adding that “there is still plenty of upside as DRAM upturns usually last two years and supply/demand looks favorable over at least the next year.”
But while Micron shares have been on the rise in recent months, Strategic Wealth Partners President Mark Tepper says the stock is a Hold, and is concerned that any supply and demand issues could put a dent in the stock’s momentum.
“It’s a very, very cyclical semi, and their product really in my opinion is the input to technology, it’s not technology itself, so I’d rather own the technology,” Tepper said.
However, there’s another chip stock Tepper has his eye on now.
“Nvidia (NASDAQ: NVDA) is the way to go,” Tepper said. “That’s our largest chip exposure, and they’re in all the fastest-growing end markets that we find exciting – AI, autonomous vehicles, cloud, gaming. So, I think they’ve got the best chips. Nvidia, they’re innovating, so that’s where I’d be.”
While Micron specializes in memory and storage chips, Nvidia is a semiconductor and is known for its superior graphics processing chips.
In the near-term, Citi analyst Atif Malik opened a “positive catalyst watch” on Nvidia shares heading into next week’s CES show, noting that the stock has fallen 9% since its September high and is lagging the rest of the chip sector.
But with CES bringing together tech investors, Malik argues the virtual meetings will shed renewed light on Nvidia’s work in video gaming and autonomous vehicles, among other applications, which should push the stock higher.
Malik also said he expects a pickup in demand for processors used in cloud-based data centers in the first half of the year, as well as sustained demand for graphics processors used in PC gaming. The demand for such processors has continued to exceed supply, in part because they are used in cryptocurrency mining.
All that aside, however, MKM Partners chief market technician JC O’Hara says Micron’s technical setup looks like it supports Citi analyst Daley’s bullish case.
“This chart looks fantastic,” O’Hara said. “There was a massive breakout last November. That breakout came from a three-year base where Micron traded in a $30 range. Now, typically what follows these breakouts after a long period of consolidation is a very powerful bull run, which I believe we are still on right now.”
O’Hara said Micron’s next move higher could bring it to $85 in the near term. The stock closed at $79.11 on Thursday.