MU Stock Forecast

Micron Technology, Inc. (MU), based in Boise, Idaho, makes dynamic random-access memory (DRAM), NAND flash memory chips, image sensors and other components, and memory modules. The stock was a huge winner in 2014, as the stock price increased nearly 60%, well above the average return for the S&P 500. However, the stock has struggled so far this year, with share prices falling more than 20%. The dip in the stock’s performance might not be done yet, either, as the company has forecasted lower than expected guidance for the current quarter, but a buying opportunity could present itself in the future for patient investors.

Micron Technology’s First Quarter Earnings Results

The company based in Boise, Idaho reported its first quarter results on January 6th, 2015, coinciding with the stock price’s fall since then. The company actually reported incredible profit growth, with a profit of $1 billion. This was up from $358 million a year earlier, and earnings per share jumped from 30 cents a share to 84 cents. But the stock price immediately started falling after the report because of slightly lower than expected revenue and decreased guidance for the current quarter.

Micron provided revenue guidance of $4.1 billion to $4.3 billion for the current quarter, below the $4.53 billion that analysts had expected. This projection means that revenue will be flat to 5% higher than the year-earlier quarter, and is rather disappointing. Besides the drop in revenue, the company is also predicting a drop of high single digits to low double digits in production of DRAM chips, and that production of NAND chips will be flat to down in the low-single digits. These lowered projections are obviously worrisome for investors, which has been reflected in the falling stock price.

Company Will Rebound In Second Half Of 2015

Considering how strong the company’s first quarter earnings reports were besides its lower projections, the ensuing sell off of the stock might be an overreaction, and might get worse before the stock corrects itself. The company is set to report its second quarter earnings results on April 2nd, and the stock price could fall even further if the results are as bad as expected. But there are promising signs that the company will rebound this year.

The main factor that will help the stock price recover and grow further is the introduction of its 3D NAND chip, which should see tremendous demand. Micron is building this model in collaboration with Intel and will be second to the market, arriving after Samsung. It has a large advantage over other companies in the market, though, such as SanDisk and Toshiba. Its early entry into this market should help it with market share.

DRAM chips are another reason to be bullish about Micron in the long term. DRAM chips are popular for mobile devices, and their demand should increase because of higher sales volume of 4G and LTE smartphones. Micron is the leader in DRAM production, so increased demand for these products will lead to higher sales and higher ASPs in the long run.

Besides the bullish outlook for NAND and DRAM chips after the current quarter, a low valuation also make this stock attractive for investors. The company’s P/E ratio is currently just above 8, which is low for any stock, but is extremely low when taking into account that the industry as a whole has a P/E ratio of over 37. This further points to an opportunity for investors to buy this stock on the cheap to earn an easy profit in the future.

Algorithmic Forecast For Micron Technology Over Past Year

I Know First supplies financial services, mainly through stock forecasts via their predictive algorithm. The algorithm incorporates a 15-year database, and utilizes it to predict the flow of money across 2000 markets. The algorithm has more data to forecast within the long term and, naturally, outputs a more accurate predication in that time frame. Having said that, intraday traders, along with short-term players, will also benefit by taking the algorithmic perspective into consideration.

The I Know First algorithm was able to correctly predict the behavior of Micron Technology’s stock price for the last year. Figure 1 is an I Know First algorithm prediction made on March 9th, 2014. The self-learning algorithm uses artificial inelegance, predictive models based on artificial neural networks, and genetic algorithms to predict money movements within various markets.

The algorithm produces a forecast with a signal and a predictability indicator. The signal is the number in the middle of the box. The predictability is the number at the bottom of the box. At the top, a specific asset is identified. This format is consistent across all predictions. The middle number is indicative of strength and direction, not a price target. The bottom number, the predictability, signifies a confidence level.

In this forecast, Micron Technology had a signal strength of 1.00 and a predictability indicator of 0.15 for the one-year time horizon. In accordance with the algorithm’s prediction, the stock price increased 17.36% over that time.

Current Algorithmic Forecast

Having demonstrated how I Know First’s algorithm was able to correctly predict the movement of Micron Technology’s stock price earlier in the article, it is worthwhile to see if the algorithm agrees with the bullish fundamental analysis of the company. Figure 2 includes the three-month and one-year forecasts for Micron Technology from March 18th, 2015. In both forecasts, the company has a positive signal, indicating the algorithm is bullish for the stock.

This forecast makes sense when taking into account the recent pullback in the stock price and how it is currently undervalued in the market due to the poor guidance for the coming quarter. The next earnings report comes on April 2nd, and results are likely to not be great, but that is expected. Investors should be ready to take advantage of the slumped stock price, as it is likely to recover during the second half of the year and investors looking for large return opportunities should add this stock to their portfolio, as a repeat of its performance from 2014 could be coming in the future.