Micron Technology Stock Prediction: New Technology Creates New Oppurtunity

The article was written by David Shabotinsky a Financial Analyst at I Know First, enrolled at an undergraduate Finance program at the Interdisciplinary Center, Herzliya. 

Micron Technology Stock Prediction


  • Why Fundamentals Will Not Work Here
  • Growth Prospects
  • New Technology Announcement Regarding Releasement of Premium Product
  • Competitive Advantage Prospects
  • I Know First maintains a bullish long term forecast on MU


Since I Know First’s Last Bullish Article regarding Micron, the stock has been up over 25%.

Micron Technology, Inc., through its subsidiaries, manufactures and markets dynamic random access memory chips (DRAMs), very fast static random access memory chips (SRAMs), Flash Memory, other semiconductor components, and memory modules. It is a part of the Semiconductor Devices industry.

Fundamentally the two most positive metrics regarding MU are its above industry average operating margins at 4.9%, while the industry average is at 4.4%. As well as a lower P/S (price to sales) of 1.3 than 2.3 from the industry. Although many traditional fundamental metrics might say MU is overvalued and a sell; due to the fact that they have experienced negative earnings in the past two quarters, a different analysis may better explain the bullish reasoning behind MU. For example, many might be deterred from investing in MU, due to its above industry average P/E.

It is important to note, that MU has been engaging in cost saving measures, that have resulted reducing operating expenses of $400 million this past quarter (Q3), allowing it to expand its operating margins.


The crux of why so many analysts are bullish of MU revolves around near term price increases expected with their two main products, the DRAM and NAND. Many Analysts have suggested that due to the rise in spot prices for NAND flash chips and the sales volume of DRAM, Revenues for the current quarter are now estimated at $3.35 Billion, instead of MU forecast of between $2.9 Billion and $3.2 Billion. Although it may be difficult to increase output, as capacity is currently low and many cost reductions measures have taken place; MU CEO and MKM partners, have explained that due to a low current supply MU will try to meet that goal nevertheless. Meaning, that if MU will be able to increase turnover of their products they would be able to as well increase their revenues, significantly aiding both the top and bottom line.

In addition, on August 9, 2016, MU had introduced a new NAND memory solution for next-generation smartphones, providing better quality. They hope to meet the ever growing demand of storage space, for mobile users, as explained by Mike Rayfield, vice president of Micron’s mobile business unit.

New Technology Announcements:

Even bigger news for MU, which specifically gear towards their growth prospects, revolve around recent news of Micron going to market with a revolutionary memory technology, developed with Intel, called 3D Xpoint. This new technology is expected one-thousand times the performance power of the current NAND flash. The new technology will be sold under the product name of QuantX, and is expected to be for sale towards the second quarter of FY 2017, aimed specifically towards data center applications.

Demand is clearly the biggest mystery for MU, this product can really take them out of a rut, as they have seen earnings and revenues both declined throughout past quarters. Micron executive Jon Carter, Micron’s vice president of storage solutions as well as other analysts tracking MU, demand for better memory technology is surging and only growing, therefore; long-term growth potential is achievable

Screen Shot 2016-08-24 at 4.43.56 PM



In addition to demand presence, the partnership itself can be seen as a great image boost towards Micron Technology. Intel is clearly an incumbent in the industry as a whole, therefore, partnering with them will allow Micron to take advantage of Intel’s capabilities, and a produce a more long-term competitive advantage.

In addition to helping establish a long-term competitive advantage, the new QuantX technology, will allow Micron to reestablish itself high-end premium brand in the industry, overtaking similar looking investments such as Samsung and Qualcomm (QCOM).

As seen in this recent analysis, Micron and Qualcomm may seem similar, but in reality are both two different companies and investment opportunities. They both operate in two very separate target markets, Micron’s main product revolves around memory chips, while Qualcomm focuses on high-speed communication tools. In addition, Qualcomm on the surface can be seen as more of conservative investment, as they have a relatively consistent dividend yield at 3.4% and has seen stable fundamentals over the course of the past quarters, ie positive earnings. Micron, on the other hand, is more of a risk-reward scenario, and with an investor seeking a high return on investment, a higher risk is indeed necessary.

Micron, unlike Qualcomm, is more vertically integrated, as they produce their chips through in-house capacity. Thus, they are not prone to rely on other companies like Samsung, that is also a competitor in the industry. That being said, Samsung does often times start price wars with Micron, regarding DRAM and NAND micro-chips. Thus, the new technology will allow Micron to beat Samsung, by offering this premium product, through differentiation strategy, as a part of the competitive advantage.

Not only will Micron be vertically integrated, they will also become a premium brand that can beat Samsung in the industry for memory chips. They as well currently, from technical analysis look very different as shown below, with Micron clearly having a higher momentum look forward, as investors are beginning to see the clear opportunity at hand.

Screen Shot 2016-08-25 at 2.26.31 PM


What will end up happening is a further increase of capacity, which has already begun. To do so, Micron will need to further increase spending, and possibly issue new debt to do so as they are low on cash.

Investors are increasingly optimistic about the prospects for the future of MU, a huge catalyst for the stock price.

Those reading this that are wary of investing in MU should understand that firms with established competitive advantages, usually have been able to establish them through short-term profitability. We have seen countless examples of this throughout history, more recently Amazon has done so, and is not reaping the rewards.Micron understands they must offer a premium product in the industry and the QuantX, may allow them to position themselves as such, and create a competitive advantage made up of a differentiation strategy.


Micron Technology Stock Prediction

Past I Know First Forecast Successes with MU

I Know First has been bullish on MU in the past, as shown below. In past forecasts, such as the one dated on June 23, 2016, the I Know First algorithm correctly predicted an increase MU in a 1 month time period. The return on MU during the course of 1 month had been 17.78%, providing an investors a 16.15% premium over the SP500’s return of 1.61%, during the same period. MU had a signal strength of 55.35, and a predictability indicator of 0.33. This forecast was apart of the Computer Industry Stocks package, and the algorithm had predicted 8 out 10 stocks correctly, with an average return of 12.65%.

Micron Technology Stock Prediction

The forecast is color-coded, where green indicates a bullish signal while red indicates a bearish signal. Brighter greens signify that the algorithm is very bullish as it does at the top of this forecast. The signal is the number flush right in the middle of the box and the predicted direction (not a specific number or target price) for that asset, while the predictability is the historical correlation between the prediction and the actual market movements. Thus, the signal represents the forecasted strength of the prediction, while the predictability represents the level of confidence. 

The forecast for MU was sent to current I Know First subscribers on June 23, 2016.