The MU Stock Forecast article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

Summary:

• Micron’s stock has risen +43% since my June 20, 2020 buy recommendation for it. I am again endorsing it as a buy. MU is still relatively undervalued.
• Micron’s SGRAM memory products are key to Nvidia and AMD’s discrete GPU business. The discrete GPU business is growing at 33.6% CAGR.
• The Piotroski score of MU is 8. Micron is a safe long-term investment.  
• Micron is expanding into the fast-growing $13.7 billion data center accelerator market. The scalable Micron AC-511 compute module product is very promising.

I am reiterating the buy recommendation I gave Micron’s (MU) stock last June 2020. The +43% gain in Micron’s stock price since that previous article is substantial enough. On the other hand, MU is still relatively undervalued when compared to its more popular semiconductor peers. MU’s Forward P/E ratio is only 6.27x. This is significantly lower than Nvidia’s (NVDA) 57.98x.

Investors should know that Micron has been supplying the DRAM modules that are used in Nvidia’s discrete GPUs (Graphics Processing Units). Micron deserves higher forward P/E because it has been supplying GDDR5X memory chips to Nvidia and Advanced Micro Devices since 2016. Micron’s GDDR6X SGRAM is used in Nvidia’s GTX 3090 and GTX 3080. The reported high costs of Micron GDDR6 and GDDR6X SGRAM are being faulted why Nvidia’s latest high-end and mid-range GPUs are expensive. Micron is key to Nvidia’s massive success.

Why MU Has High Upside Potential

The discrete GPU business was worth 19.75 billion in 2019. It is growing at 33.6% CAGR. It will be worth $200.85 billion by 2027. On this note, we should make a forward assessment of MU by valuing it as a key partner of Nvidia and AMD. It is only fair that MU gets a Forward P/E of 10x or higher. Micron will report its FQ4 2021 ER this coming September 28. We should therefore make a forecast for FY 2022. Assuming FY 2022’s EPS breaches $11.50, the value price of MU should be $115.

My 1-year price target for Micron’s stock is, therefore, $115. The investment thesis of this article is that the significant undervaluation of MU gives it an upside potential of 59%. My 1-year price forecast is reasonable. The average 1-year price target for MU is 116.52.

The high optimism of 21 Wall Street analysts for MU is something you should heed. Those analysts also share my expectation that MU’s ongoing undervaluation will eventually get corrected.

Micron Is A Safe Investment

Micron’s stock is very affordable. It is also a safe buy-and-hold type investment. I checked the balance sheet of Micron. The total cash position of MU is $8.35 billion. This is greater than its long-term debt of 5.96 billion. Micron’s EBIT of $4.62 billion is large enough to cover the interest payments on its total debt of $7.23 billion. The high 42.6% operating cash flow margin of Micron is admirable. The current ratio of 3.4x also says Micron has excellent liquidity.

The easiest and best way to judge the financial health of the company is to check its Piotroski score. Micron and AMD have the same Piotroski score of 8. They are both efficient and stable. They are not going to get bankrupt within the next 10 years. The only aberration is that MU has much lower valuation ratios than AMD.

Micron’s strongest trait to me is that it has a Piotroski score higher than Nvidia and Intel (INTC). MU has 8 while INTC only has 6 and NVDA has 5.

Tailwind From Data Center AI Accelerators

Micron bought FWDNXT in 2019. FWDNXT is now letting Micron build hardware plus software solutions for Artificial Intelligence and deep learning. Micron is using its data-center memory modules integrated with FPGA to make deep learning accelerators. The Micron AC-11 HPC (High-Performance Computing) data center accelerator could be a cheaper alternative to Nvidia’s $199,000 DGX A100 product.

The AC-511 uses the inference engine of FWDNEXT and Micron’s 2GB Hybrid Memory Cube + 16GB DDR4 SODIMM PC4-2166. The processor is Xilinx’s (XLNX) Virtex Ultrascale+ FPGA up to 3 AC-511 compute modules can be fitted inside Micron’s ACS full PCIe backplance (up to 8 backplanes in a 4U chassis). FPGAs are now accepted as more affordable alternative AI accelerators to Nvidia Tesla GPUs. This fact is why AMD is willing to pay $35 billion just to acquire 100% of Xilinx.

Going forward, MU has a very promising tailwind from its AI accelerator products like the AC-511. The global data center accelerator market is growing at 36.7% CAGR. This niche market is worth $13.7 billion this year and it will grow to $65.3 billion by 2026.

MU Stock Forecast: Conclusion

The high Piotroski score of 8 and the low valuation ratios of Micron make its stock a strong buy. My one-year PT of $115 is congruent with the average PT of many Wall Street analysts. Micron is now emerging as the FPGA AI accelerator solutions rival of GPU-centric Nvidia. Going forward, data center accelerators could add $500 to $800 million to Micron’s annual topline.

Micron still has $8.5 billion in total cash it could use to buy AI-related hardware and software companies. Micron cannot afford to buy Microchip Technology Incorporated (MCHP) but it sure can buy a substantial stake in Chinese FPGA company, Gowin Semiconductor.

My strong buy recommendation is supported by I Know First forecasts for MU. The AI algorithm of I Know First gives Micron a very high one-year forecast score of 362.19 and 0.7 predictability factor.

Past Success With MU Stock Forecast

I Know First has been bullish on Micron’s shares in past forecasts. On our July 28, 2020 premium article, the I Know First algorithm issued a bullish MU stock forecast. The algorithm successfully forecasted the movement of Micron’s shares on the 1 year time horizons. MU’s shares rose by 52.54% in line with the I Know First algorithm’s forecast.

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