By Adam Clark
Micron Technology stock was bouncing between small gains and losses early Tuesday. The memory-chip company is looking to add gloss to its strongest ever quarterly performance and there's reason to believe it can keep going.
Micron shares were down 0.4% at $1,141.79 in premarket trading. The stock has gained 232% this quarter coming into Tuesday's session, according to Dow Jones Market Data. That has contributed to the share price more than quadrupling this year so far.
The shares have become volatile amid a flood of retail investor interest. The concern is that at some point it could fall sharply as the memory-chip industry goes through cycles of boom and bust, with eyes on a flood of new manufacturing capacity from South Korea, which was announced this week.
However, as Barron's has previously written, there are grounds to back Micron to go further. The company is securing long-term supply deals with minimum price agreements, which it has said should guarantee its gross margins will remain "well above" their previous peak. Those contracts are set to constitute about 40% of Micron's revenue, and the company hopes to raise that percentage.
UBS analyst Timothy Arcuri interprets that to mean Micron believes it can maintain gross margins of 70%-75% — down from 85% in its most recent quarter, but much higher than its prior gross margin peak of about 62% in 2018.
Arcuri has a Buy rating and $1,625 price target on Micron stock. The average price target on Micron stock across Wall Street is $1,543, according to FactSet.
Write to Adam Clark at adam.clark@barrons.com
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