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Micron Shares Jump After UBS Boosts Rating, Price Target Into 'Cyclical Upswing' For Memory Markets

Micron is in a stronger position than some industry peers to capitalize on a near-term upswing in global memory prices, UBS analysts argued Wednesday.

Micron Technology  (MU) - Get Micron Technology, Inc. Report shares jumped higher in pre-market trading Wednesday after analysts at UBS boosted their rating and price target on the chipmaker amid what it sees as a "cyclical upswing" for global memory markets.

UBS analyst Timothy Arcuri lifted his price target on Micron by nearly 60%, to $75 per share, and improved his rating to "buy" from "neutral", citing "higher estimates and improving industry dynamics" for the group, particularly in markets for DRAM memory chips, which are commonly found in computers and severs. Arcuri said the DRAM upswing should last "deep into 2021" and argued that Micron is in a stronger position to benefit from the cyclical changes than some of its domestic peers.

"After only modestly outperforming the S&P 500 over the past two years, we believe the time has finally come when Micron can materially outperform over a sustained period of time," Arcuri said. "We also argue that Micron deserves a higher multiple given its improving competitive position and through-cycle financial performance that is comparable to or even better than other major semis peers with integrated manufacturing models like Intel  (INTC) - Get Intel Corporation Report or Texas Instruments  (TXN) - Get Texas Instruments Incorporated Report." 

Micron shares were marked 6.5% higher in pre-market trading Wednesday to indicate an opening bell price of $61.00 each, a move that extends the stock's six-month gain to around 44.8%.  

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Micron sells both NAND and DRAM memory chips. DRAM chips are generally more advanced and offer better profit margins than NAND. However, DRAM is only produced by a small number of players on a large scale, including Micron.

Because Micron Technology's revenue is more than 60% derived from DRAM chips, that means it has the potential for higher profit margins than many of its peers, TheStreet's Michael Wiggins De Oliveira noted in a mid-December report.

Last week, Raymond James analyst Chris Caso upgraded Micron and raised his one-year price target to $70 amid supply/demand conditions that are "highly likely to improve further as the year progresses."