‘Substantial upside’: Morgan Stanley portfolio manager loves this memory stock — and it’s among analysts’ top picks for 2024
Chipmaker Nvidia and Google parent Alphabet were among the tech sector’s investor favorites in 2023. One investor, however, has set his sights on another company offering a “value angle” on both semiconductors and artificial intelligence. That stock is semiconductor manufacturer Micron Technology . Micron makes dynamic random access memory chips and NAND flash memory chips. DRAM, or dynamic random access memory, is a type of semiconductor memory needed for data processing. NAND is another type of memory that stays viable without a power source. “With AI, we’re going to use a lot of memory. And so, the reason we like [Micron] is the consolidated industry structure that exists in this memory business today. It used to be much more fragmented, and it’s such a mature industry, that it’s really … consolidated down to a couple of players,” Aaron Dunn, portfolio manager at Morgan Stanley’s U.S. Value Fund, told CNBC’s ” Street Signs Asia ” on Jan. 24. Micron is the third-largest player in the memory sector, coming after just South Korea’s SK Hynix and Samsung , he added. The company is also set to get a boost from the surge in AI adoption, especially as more data centers are built, noted Dunn, who is also co-head of value equity at Morgan Stanley. “Memory is going to ride right alongside the processors in the memory side, as we kind of build out for AI and build out our computing power in the cloud. And so, we think that’s a huge benefit for Micron, and you’ve already seen it the stock was up 70% last year, and we still think there’s substantial upside in the stock,” he added. Over the last 12 months, shares in Micron are up around 44%. MU YTD mountain Year-to-date shares in Micron Like Dunn, several analysts from Goldman Sachs, UBS, Bank of America and Wolfe Research are bullish on the stock, naming it as one of their top stock picks for 2024. Wolfe Research said Micron will likely benefit from a strong recovery in 2025 in both the DRAM and NAND space. The research firm’s bull case scenario assumes a 40% year-on-year growth in DRAM and 50% for NAND — giving the company a 42% overall year-on-year growth rate for 2025. And Goldman Sachs wrote , “with sector valuations relative to the broader market at or near the highs on a 10-year lookback, we continue to recommend stocks where we see potential for positive EPS revisions such as Nvidia (Buy, Conviction List) and Micron (Buy).” Of 37 analysts covering Micron, 29 have a buy or overweight rating on the stock at an average price target of $99.11, giving it upside potential of around 11.3%, according to FactSet data.
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