A $6 Chip Stock That Analysts Believe Has Substantial Upside

| About: Micron Technology (MU)
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Micron Technology (NASDAQ: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 (NASDAQ: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).

Disclosure: I am long AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.