Micron Technology (NASDAQ: MU) stock has been on a wild ride between June 22 and July 22, trading as low as $804 and as high as $1,255. Given the volatile price swings over that time, when Micron’s stock price falls below $1,000, investors may be wondering whether it’s a “buy-the-dip” moment or if it’s better to stay on the sidelines.
Based on the median price target from 54 analysts tracked by CNN, here’s what the math suggests about whether buying Micron below $1,000 has a favorable risk-to-reward setup.
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Where Micron stock could be in the next 12 months
According to 54 analysts, the median price target for Micron over the next year is $1,600. We can work out what a return would look like if Micron were to reach that price target based on two recent closing prices.
On July 20, Micron closed at $865.46 per share, so if the stock were to reach $1,600, that would have been a gain of 84.8%. From its closing price of $959.48 on July 22, reaching that $1,600 target would be a gain of 66.7%.
To offer an even wider lens on the risk-to-reward setup, the highest price target among the 52 analysts tracked by CNN was $2,200, while the lowest was $361.
What price targets offer
Price targets are estimates, and there are not only internal factors within the company, but also external factors that analysts can’t envision that could affect those estimates over the next 12 months. That’s why price targets aren’t guaranteed to come true, and they shouldn’t be used as the main reason for buying a stock.
That said, it does help gauge the upside potential of a stock and what might happen under the worst-case scenario. Based on the hypotheticals shared earlier, in which Micron could trade up to around 85% higher over the next 12 months, investors who can handle the risk and price swings may benefit from investing when Micron falls below $1,000.
Expectations matter
A stock returning another 60% to 85% over the next year is exceptional. And as memory and storage chip shortages are expected to continue for the foreseeable future, Micron is poised to continue benefiting and could offer those kinds of returns. But those potential gains may still manage to disappoint some investors.
As of this writing, the stock has climbed more than 780% over the past 12 months. In comparison, a gain in a range between 60% and 85% may sound like a letdown to anyone just investing in Micron now.
