One analyst thinks that this is the time to buy Micron Technology. (MU)
Micron stock has rallied more than 150% since the start of 2016. In comparison the S&P 500 has gained 25% gain for that period. The huge increase has been driven by the convergence of multiple demand tailwinds and zero supply headwinds.
Demand is ramping in a big way. Cloud data centers are growing at an unprecedented pace. Mobile workload demand continues to go up and up. The Internet of Things (IoT) is giving birth to an entirely new growth area for performance, data collection and data storage. Virtual and augmented reality are reinvigorating the video game world.
Meanwhile, supply is constricted in a pretty big way. To begin with, there aren’t many players in the space. Really, there are only three on the DRAM side of things and five on the flash side. In addition, the in-demand chips are the more-complex ones. As a result, suppliers are now investing in technology rather than just building out capacity.
The combination of fewer producers and lower capacity leads to tight supply. Tight supply plus big demand equals big gains in profitability.