When it comes to different semiconductor products, a handful of companies are controlling most of the market. This is no different for DRAM products (dynamic random-access memory) which are used in a wide range of products such as PC’s, mobile devices and 5G tech.
The 3 major players in the DRAM market today are Samsung, SK Hynix and Micron Technology and today we’re going to talk about the one located in the US, i.e., Micron Technology (NYSE: MU).
Overall Micron Technology’s business is cyclical in nature, but with the DRAM market now being heavily consolidated, coupled with strong demand across the board, this should help to keep prices stable at current elevated levels for some time.
The US has the world’s 2nd largest semiconductor demand which Micron, due to its location can take full advantage of. This is confirmed by the company’s latest revenue numbers for the quarter ending May 31st, which clocked in at $7.4 billion, up 36.5% year-over-year.
In general, tech-stocks tend to be expensive. But Micron, with a strong balance sheet and solid debt vs cash ratio at 0.16, looks rather cheap compared to most tech-stocks these days.
Based on the strong demand in the sector and lack of competition, coupled with the stocks price action, we do think Micron Technology could be a solid long-term buy on solid pullbacks into a good price range.
The stock was confined within a 30-dollar-range for quite some time, but towards the end of last year, price broke out to the upside, followed by a solid bull run resulting in a 80+% gain in 5 months.
The stock topped out at around $97 end of March this year and has since been in a corrective pullback, indicating that bulls are still are present. For now, we do not see any indication of a bullish transition or reversal and think that the top of the old range between $58.5-$64.5 is a good location to start looking for potential longs in this stock.
In Micron there are about 725K calls and 843K puts, so slightly heavy on the put side, which is to be expected considering its been consistently bearish for months lately. I don’t see any changes in gamma hedging or option positioning till we get to the high 50’s or low 60’s, which is supported by our price action analysis above.
FULL DISCLOSURE: Chris Capre currently has no stock or option position in MU. If you’d like to learn more about Chris’s trades and positions, you can get access via the Trading Masterclass where he shares his live trades, further investment ideas and daily market analysis.