‘Things Could Get Ugly,’ Says Top Investor About Micron Stock

Micron (NASDAQ:MU) stock has enjoyed a remarkable run, soaring about 630% over the past year, as the AI-inspired surge in demand for advanced memory products pushed the company’s sales, profits, and share price through the roof in just a few short months.

For many investors, initial concerns over the cyclical nature of the memory industry seem to have given way to abject euphoria. The advent of AI fundamentally changes the game, as this thinking goes, raising the floor of the memory business for good.

The bullish theory is certainly on the ascent, as hyperscaler capex continues to grow and the memory supply appears years away from meeting the thirsty demand. And yet, into these sunny skies, top investor Victor Dergunov offers an emphatic rebuttal to the continuation of the MU success story.

“No, it’s really not different this time,” says the 5-star investor, who is among the top 4% of investors covered by TipRanks. “I expect the memory market’s supply/demand imbalance to normalize, eroding MU’s pricing power and compressing margins.”

In that sense, MU is playing on borrowed time, according to Dergunov. While he acknowledges that the memory shortage could persist longer than with previous cycles, eventually the pendulum will swing back “from undersupplied to oversaturated.”

That would serve as a significant drag on profits, making multiple compression a foregone conclusion. “I believe that Micron’s stock price is destined to fall hard,” adds Dergunov.

Indeed, the investor calls the company’s valuation “preposterous,” its price action “parabolic,” and its vertical chart “insane.” That all adds up to a stock that is beginning to resemble a “bubble.”

Though FOMO-induced buying could continue pushing MU higher, Dergunov doesn’t expect its share price to remain there forever. Citing his concerns about Micron’s long-term valuation, it’s therefore an easy investment decision.

“I downgrade MU to a sell, anticipating a correction to $600–$500 and potentially lower levels longer term,” sums up Dergunov. (To watch Dergunov’s track record, click here)

Wall Street doesn’t see it that way – though it hasn’t quite caught up to the market’s exuberance, either. MU enjoys a Strong Buy consensus rating backed by 27 Buys and 3 Holds. Still, the Street’s average 12-month price target of $657.41 implies about 8% downside from current levels. (See MU stock forecast)

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.