Last week, a Morgan Stanley analyst downgraded Micron (NASDAQ:MU) stock. This sent the stock to the low $70s, well below the $95 “multiple tops” earlier this year. The downgrade does not represent Micron’s true potential ahead.
Worries over Micron’s pricing strength are pressuring the stock. Yet NAND demand is not dropping. Profit margins are unlikely to weaken until after the chip shortage ends. DRAM may face some pressure as memory demand levels off. Still, smartphone and personal computer demand are not falling. Furthermore, Micron’s CFO Zinsner said that inventories and low demand are strong.
With PC DRAM only a fraction of the revenue, MU stock looks oversold.
Intel (NASDAQ:INTC) fell slightly in sympathy for MU stock dropping. But Intel is pushing ahead with new CPU chips that will sustain its profit margins. Whenever INTC stock trades in the low $50s, it is at a good discount for value investors.
Downgrading MU makes little sense. The entire chip sector moves in unison. That would imply AMD and Nvidia (NASDAQ:NVDA) are stocks to sell. After AMD posted very strong growth, chances are low that Micron and Intel are facing a downdraft in demand. Nvidia’s continued strength in the GPU market and cloud computing solutions re-affirms the chip sector’s uptrend will continue.