Micron stock on track for first record close since 2000

Micron shares are set to rise for the third straight trading session and continue their strong recent rally. The chip maker’s stock has gained about 38% over the past three months amid optimism about improving trends in the memory market.

In comparison, the PHLX Semiconductor Index
SOX,
+0.75%
has dropped about 15% over the past three months and the S&P 500 index
SPX,
-0.10%
has gained 9.9%.

Evercore ISI analyst C.J. Muse chimed in with an upbeat take on memory dynamics Wednesday, following a recent conversation with the company’s chief financial officer.

“[L]ong-term agreements (which cover ~75% of Micron’s revenues) are helping provide excellent visibility for management and, when coupled with generally lean inventories, continue to point to the [February quarter] as the bottom with clear line of sight to acceleration into Micron’s 2HFY22,” he wrote in a note titled: “Visibility To A Bottom Intensifying”

Muse also discussed recent COVID-19 protocols in Xi’an, China, which have caused disruptions for Micron and others that operate facilities there, and the need to comply with new regulations around workplace staffing meant to help curb spread of the virus.

“We note that Samsung’s [Xi’an] facility manufactures front-end NAND wafers, while Micron’s is used instead for back-end test and assembly (which they noted they can flexibly shift around their global footprint),” he wrote. “As a result, the impact of Xi’an shutdowns is likely to be much more pronounced on NAND pricing than DRAM pricing, with the market likely to get a better view of the overall impact in the coming weeks.”

Overall, Muse pointed to management’s expectations for “relatively balanced” supply and demand across DRAM and NAND throughout the calendar year. Such a dynamic would represent “a clear positive for memory stocks if [it] proves true,” he wrote.