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Micron Technology Stock: 13% Yield Potential with New Game Consoles and 5G

Company name: Micron Technology
Ticker: MTE.EU (EUR), MU.US (USD)
Current Price: €39, $46
Target Price: €44, $52
Projected Yield: 13%
Time Line: 3 to 6 months
Risk: Average

About Micron Technology

Micron Technology is a US semiconductor manufacturer, with the main products being DRAM, NAND, and flash and SSD storage. The products are marketed under the Crucial Technology brand, while a small fraction is also marketed under the Micron brand.

What's the Idea?

Capitalize on the stock that may rise due to the increasing demand for the company products, which is expected after the release of next gen game consoles and the massive transition to 5G.

Buy Micron Technology Shares >>

Why Trade Micron Technology?

Reason 1: Impressive Financial Results in Q3 2020

Micron posted solid financial results in Q3 given the impact of the COVID-19 pandemic. The company earnings increased by 13% compared to last year and amounted to $5.40 billion, while the operating and net profit margin amounted to 18% and 17%, respectively, showing a slight decrease compared to the previous year. The company was still able to maintain a stable operating cash flow of over $2 billion.

Micron was able to perform well by maintaining high production capacity. The increasing sales of equipment for data centers covered the weak demand for consumer products.

The company is confident amidst the COVID-19 crisis. With a gradual improvement in the market situation, further earnings growth and an increase in business margins may be expected.

Reason 2: Expansion and Upgrade of Data Center Equipment

The COVID-19 pandemic has sparked an increase in online activity, which boosted interest in online games, video streaming services, and e-commerce. This made many companies providing such services increase their investments in the data center infrastructure. Micron has benefited greatly from this, as the demand for the company's products in the data center and networking industry showed significant growth. In particular, cloud DRAM sales increased 13% in Q3 2020, compared to the same period in 2019.

The company management claims the increase in demand may last for long, as the data center and networking segment may boost Micron's earnings further on.

Reason 3: Global 5G Transition

Micron's mobile segment earnings reached $1.50 billion in Q3 2020, accounting for 28% of total revenue and rising by almost 30% compared to the previous year. Micron attributes this to the increased demand for DRAM memory used in smartphones.

The world is currently switching to 5G, which means the consumers will have to renew their devices. This trend is particularly relevant in China, where a third of all shipments was for 5G devices.

The demand for Micron's mobile DRAM has also increased, as the customers include some key Chinese manufacturers, such as Xiaomi. That being said, 5G smartphones are just being released in the market. According to Fitch Ratings analysis, the share of smartphones with 5G will have grown from 9% to 17%-20% globally by 2021. This could significantly spur the increase in demand for DRAM memory used in mobile device manufacturing.

Reason 4: Next Gen Game Consoles

Two new console models, PlayStation 5 by Sony and Xbox Series X by Microsoft, are scheduled for release in the second six month of 2020. In April, Bloomberg reported that Sony intends to produce 5 to 6 million PS5's by March 2021. This could increase the annual demand for NAND flash modules by 5%.

As the experts say, the total sales of consoles may reach over 100 million units by 2024, which might boost more demand for DRAM and NAND over the next 5 years.

As a result, the release of new game consoles could be a catalyst for Micron's earnings growth due to the increased demand for DRAM and NAND memory modules manufactured by the company.

How to Use the Investment Idea

  1. Buy Micron Technology shares at the current price.
  2. Allocate no more than 3% to 4% of your midterm transaction budget.
  3. Sell the stock when the price is €44 or $52 per share.

How to Buy Micron Technology Shares?

If you don't have an investment account yet, open it now: this can be done online, in just 10 minutes. All you need to do is fill out a short form and verify your account.

After opening an account, you can buy shares in either of the following ways:

Freedom24 Web Platform: In the Web Terminal section, type MTE.EU (EUR) or MU.US (USD) (Micron Technology tickers in Xetra and the NASDAQ) in the search box, and select Micron Technology in the results.Open a secure session in the trading window on the right, select the number of shares you want to buy, and click Buy.

Freedom24 iPhone or Android App: Go to the Price screen and tab the search icon in the top right corner. In the dialog that shows up, type MTE.EU (EUR) or MU.US (USD) (Micron Technology tickers in Xetra and the NASDAQ), and select Micron Technology in the results. You will then see Micron Technology stock in the market watch; tap it and go to the Order tab in the dialog that shows up. Specify the number of shares you want to buy and click Buy.

Buy Micron Technology Shares Now: Don't Miss out while the Demand for Micron Technology Products Is High!

Buy Micron Technology Shares >>

*Additional information is available upon request. Investment in securities and other financial instruments always involves risks of capital loss. The Client should make himself aware at his own accord, including to familiarize himself with Risk Disclosure Notice. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Commissions, fees or other charges can diminish financial returns. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and do not constitute an investment advice service. The recipient of this report must make their own independent decisions regarding any securities or financial instruments mentioned herein. Information has been obtained from sources believed to be reliable by Freedom Finance Cyprus Ltd or its affiliates and/or subsidiaries (collectively Freedom Finance). Freedom Finance do not warrant its completeness or accuracy except with respect to any disclosures relative to the Freedom Finance and/or its affiliates and the analyst’s involvement with the issuer that is the subject of the research. All pricing is indicative as of the close of market for the securities discussed, unless otherwise stated.