Micron surges as investors expect the semiconductor industry to recover

Micron Technology

While the ongoing semiconductor shortage has been a hot topic for the past year, it seems the end to this crisis might be coming over the horizon soon. One of the largest chip manufacturers has indicated that 2022 might be the year when things start returning to normal for the industry. In particular, Micron (NASDAQ: MU) saw its stock surge on Tuesday after management made some optimistic statements about the state of the industry going forward.

The company gave an updated forecast on its upcoming quarterly earnings, predicting a figure well above most analysts’ expectations. The company now expects Q2 revenue to come in at around $7.3 billion to $7.7 billion. That’s beyond the $7.2 billion average that most analysts were predicting.

While the news was already a good catalyst for traders, Micron’s stock price really shot up after the company chimed in on the ongoing semiconductor situation. Among other things, management said that the supply chain problems inhibiting the manufacturing process are easing up at the moment. Since most chipmakers have suffered similarly due to the current supply chain situation, the fact that Micron is resolving its issues now could be a sign that other manufacturers are also making similar headway.

As expected, Wall Street was quick to upgrade the stock following the news. This included analysts from Wedbush, Bank of America, and Stifel, all of whom are now expecting the semiconductor market to surge in the coming 12 months now that these previous issues are being resolved.

Micron surprised us and the Street by providing robust guidance that suggests both Micron and the memory market are nearing a very shallow cyclical trough rather than the harsh wintery downturn some had projected,” wrote Wedbush analyst Matt Bryson, who increased his price target to $100 from $85. “We believe forward expectations for memory fundamentals have indeed improved through the course of the quarter discounting the likelihood of a longer cyclical decline.”

Even besides semiconductor manufacturers, the chip shortage has had a serious impact on other industries as well. Car companies have been forced to scale down production due to a lack of chips. Other electronics companies have been forced to make similar concessions as well due to a lack of critical parts.

Shares of Micron were up almost 10% on Tuesday following the news. That’s the biggest single-day increase the company has seen in almost a year, adding more than $10 billion to the company’s market cap in a single day. Despite today’s gains, the stock has been up just 22.5% since the year began. While demand for semiconductor chips has been strong, companies in the industry have seen their share prices plummet as manufacturing capability has struggled to keep up with this demand.


Micron Company Profile

Micron historically focused on designing and manufacturing DRAM for PCs and servers. The firm then expanded into the NAND flash memory market. It increased its DRAM scale with the purchase of Elpida (completed in mid-2013) and Inotera (completed in December 2016). The firm’s DRAM and NAND products tailored to PCs, data centers, smartphones, game consoles, automotives, and other computing devices. – Warrior Trading News