Why Micron Technology Stock Rallied on Tuesday

Shares of Micron Technology (NASDAQ: MU) popped on Tuesday, jumping as much as 6.2%. As of 10:40 a.m. ET, the stock was still up 3.6%.

The catalyst that sent the semiconductor specialist higher was some bullish commentary from Wall Street.

Big price target boost

Micron stock has been firmly in rally mode, gaining 675% over the past year, thanks to unrelenting demand for its memory and storage chips. Many on Wall Street believe there's still upside ahead.

KeyBanc analyst John Vinh raised his price target on Micron to $1,750 while maintaining an overweight (buy) rating on the shares. For those keeping score at home, that represents potential upside of 87% compared to Monday's closing price.

The analyst recently traveled to Asia to assess the supply chain and returned bullish. He cited strong data center demand and suggested that prices for dynamic random-access memory (DRAM) and NAND flash memory will rise by double digits through the end of the year. Moreover, he expects prices for high-bandwidth memory (HBM) to double over the coming year.

Is he right?

Memory chip stocks have tanked in recent weeks, taking a breather after a spectacular rise. Yet Wall Street remains bullish. Of the 45 analysts who have issued an opinion in July, 89% rate Micron stock a buy or strong buy, and none recommend selling.

During the company's recent earnings call, CEO Sanjay Mehrotra said that demand for DRAM and NAND chips continues to exceed supply and the company "expects tight conditions to persist beyond calendar 2027."

With that as a backdrop, it's easy to see why Wall Street is bullish. Furthermore, Micron's recent move to lock in customers to three- to five-year volume and price agreements reduces the historical boom-and-bust cycles.

And at less than 22 times earnings, Micron stock is a buy.

Danny Vena, CPA has positions in Micron Technology. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.