Micron Technology Stock: Is It Finally Time to Buy?
Micron Technology Stock has had a wild ride over the past year. The memory chip maker has been the site of some major market swings since last summer, when it became one of the most volatile stocks in the S&P 500. Micron shares have mostly been trending down since then, but recent developments may signal a turning point for this volatile stock. Let’s take a look at what you need to know about Micron stock right now and whether now is a good time to buy.
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What’s Going on with Micron Stock?
Micron stock has been one of the most volatile stocks in the S&P 500 for the past year. It began the year around $30 per share, spiked to $60 per share in August due to concerns about production, and then collapsed to $20 per share in October due to near-term demand concerns. While the stock has recovered a bit since then, it remains a risky stock to buy. The first cause of Micron’s volatility was supply concerns.
In the past, Micron has been a victim of its own success, as its DRAM (dynamic random access memory) chips are in high demand. This led Micron to be a victim of its own success, as the chipmaker was unable to keep up with demand. Recent upticks in DRAM prices have caused supply to tighten and forced Micron to lower its production. This led analysts and investors to worry that Micron would be unable to meet demand in the second half of the year due to its reduced production, sending the stock down in August.
The second cause of the volatility in Micron stock was near-term demand concerns. Increased investment in production capacity led analysts and investors to worry that DRAM prices would fall in the second part of the year and into 2022 due to a massive supply overhang. This would leave DRAM producers with a glut of inventory, sending DRAM prices sharply downward. This sent the stock down in October and early November, which caused Micron stock to fall to $20 per share at one point.
Is Micron a Buy?
Micron stock is a risky stock to buy because it has been the site of significant volatility for the past year. While the recent developments noted above (supply concerns and near-term demand concerns) have eased, they could flare up at any time. Despite the recent developments, there is still a significant risk that DRAM prices fall sharply in the second half of the year and into 2022, sending Micron stock sharply downward. Micron is also a very cyclical stock, with a high beta of 2.64, which means that it is very sensitive to fluctuations in the broader market. Given all of these factors, Micron stock is a risky stock to buy.
Recent Developments That May Benefit Micron Stock:
DRAM Supply Constraints Have Eased - Micron has been producing far below capacity in recent months due to the supply constraints in the market. This has led to a significant improvement in supply and demand, sending DRAM prices up to multiyear highs. This has eased concerns about reduced production in Micron from the reduction in capacity. Near-Term Demand Concerns Have Lessened - Near-term demand concerns were driven by expectations that DRAM prices would fall sharply in the second half of the year and into 2022. This drove down prices for DRAM and brought them back to near-term demand levels. While DRAM prices are expected to fall in the second half of the year, they are expected to remain at a higher level than they have been at since 2020.
Micron is Still Risky Despite Recent Developments:
Even with recent developments, Micron remains a risky stock to buy. The first and most obvious risk is the possibility of a significant fall in DRAM prices in the second half of the year and into 2022. Even if prices recover slightly, they are unlikely to return to near-term demand levels. If this happens, Micron stock is likely to fall again. Another risk is that Micron’s recent results do not hold up. While the stock has been recovering over the past month, it is still down 36% from its highs in October. If Micron’s results do not hold up, the stock may continue to fall.
The Bottom Line:
The Micron stock price has been highly volatile for the past year, falling from $30 to $20 per share. This was driven by two factors: supply constraints and near-term demand concerns. Recent developments in the DRAM market have eased both of these concerns, and Micron stock has started to recover from its October lows. While these developments are good news for Micron, it remains a risky stock to buy. Micron stock is likely to remain at risk of falling if DRAM prices fall again in the second half of the year and into 2022. Micron is also a cyclical stock that is very sensitive to fluctuations in the broader market, making it a risky stock to buy.
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