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The Panic-Proof Portfolio (Stockchase Research) Micron Technology MU-Q TOP PICK Jul 04, 2023

Stockchase Research Editor: Michael O'Reilly

We reiterate MU, one of the world's largest producers of computer memory chips, as a TOP PICK. Although the sector is in a cyclical slow down, the company continues to build cash reserves, buy back stock and retire its debt. It trades at under 2x book. We continue to recommend a stop at $52, looking to achieve $75 -- 17% potential upside. Yield 0.7%

(Analysts’ price target is $74.79)

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COMMENT

It reports Wednesday. It had a nice rally today. He hopes they tell a positive story about all their chips, not just the high bandwidth ones.

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TOP PICK

Micron Technology, Inc. engages in the provision of innovative memory and storage solutions. It operates through the following segments: Compute and Networking Business Unit (CNBU), Mobile Business Unit (MBU), Embedded Business Unit (EBU), and Storage Business Unit (SBU). The CNBU segment includes memory products and solutions sold into client, cloud server, enterprise, graphics, and networking markets. Social media mentions are up 119% in the past 24h.

DON'T BUY

MU is a trade, not an investment. They design and make chips. The DRAM is its biggest product; but memory chips like this are highly cyclical with changing demand. He sold MU last summer.

BUY

12-month price target of $128.70, clear runway. Cyclical. When out of favour, that can last for quite a while. AI revolution gives quite an appetite for its products.

BUY

Their high bandwidth business is on fire. Shares have fallen far and look attractive. Sees little downside.

BUY ON WEAKNESS

Impacted not only by tariff rhetoric, but also because it's a very cyclical business. 12-month price target of $118.50, but with a lot of volatility in between. If you're underwater right now, write some calls; if it starts to approach the strike price, and you don't want to get called away, just roll the strike price up.

DON'T BUY

Hyper-cyclical earnings. Storage and memory chips, which are like a commodity and so you have big swings. Consensus is for earnings to grow over 400% this year, not because of innovation but because of the demand cycle. Go back 10 years and this name has generated a total compound return of 10%, which is less than the S&P. Beta is 1.9.

DON'T BUY

Is merely okay after a couple of mediocre quarters. Is no catalyst to raise this higher.

TRADE

The market and Micron are getting toppy. This can go down to $80, no problem. This is a trade, not investment.

PAST TOP PICK

(A Top Pick May 07/24, Down 22%)

He's done with memory stocks. The industry has only a few dominant players, and this name is one of them. Yet, there's still crazy cyclicality and it's hard to be differentiated.

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