Seeking Alpha
Long only, contrarian, special situations, value
Profile| Send Message| ()  

Micron Technology (MU) has not exactly been a star performer over the last six months. The stock has dropped some 35% from its highs earlier in the year. The company reported earnings earlier in the week that missed estimates. However, the stock actually popped some 4% in reaction to the earnings report and conference call. This might mark the bottom of the stock's decline as MU is picking up some positive catalysts and a significant move up would not be a surprise.

Recent positives for Micron:

  • Late in the week, Piper Jaffray reiterated its "Buy" rating on MU and its $12 a share based on NAND strength.
  • Wedbush also reiterated its "Outperform" rating and its $8 price target on the stock. The analyst firm stated that risk/reward proposition was compelling and the stock has likely bottomed here.
  • RW Baird states the shares are attractive here as well. It has an "outperform" rating and a $10 a share price target on Micron.
  • The proposed acquisition of bankrupt Elipda will give the company significant economies of scale. It has gains Micron exposure to Apple (AAPL) as Elipda's chips are used in the iPhone and iPad.

4 additional reasons Micron is a good speculative play at $6 a share:

  1. The median price target by the 27 analysts that cover the stock is $10 a share, more than 50% above its current price.
  2. The stock is cheap at 7.5 times forward earnings, 77% of book value and just 3 times operating cash flow.
  3. MU is selling near the bottom of its five year valuation range based on P/S, P/CF and P/B.
  4. The stock has good medium term technical support at just under this price level (See Chart).

(click to enlarge)

Source: A $6 Chip Stock That Analysts Believe Has Substantial Upside