Micron Technology Inc (NASDAQ: MU) in semiconductors will benefit the most from high levels of inflation in 2022, says Citi’s Chris Danley.
Danley’s bull case for Micron Technology
Danley picked Micron as his top semiconductor stock for 2022 on Wednesday. Stating his reasons for being bullish on MU, he said on CNBC’s “The Exchange”:
Inflation is not just in food and gas. It’s also in semiconductors. Micron makes memory, which is the most price-sensitive or inflation-sensitive area in semiconductors. So, we think Micron has the most upside to earnings in 2022. We call it the good-cron, the bad one being the Omicron.
The news comes a month after Micron CEO Sanjay Mehrotra said supply chain bottlenecks were improving. Danley also likes Intel in the semi space but only for the short term. He expects “return-to-office” to be a catalyst for the stock as companies upgrade their PCs and servers.
SMH has tanked almost 10% in January
The VanEck Semiconductor ETF (SMH) is now down just under 10% for the year, but Danley says such a sell-off before earnings is “typical” in semiconductors.
We think earnings go up for almost every semiconductor company this results season. These panic sell-offs before earnings are very typical. We actually had two 10% sell-offs in semis in the first three- or four-months last year. So, this is just business as usual before we get to the numbers.
After first few months of struggle, the ETF rallied to close 2021 with an over 40% gain. According to Citi’s semiconductor analyst, inventory correction is unlikely before 2023. Therefore, semi stocks have plenty of room to run over the next twelve months.
The global semiconductor revenue topped $500 billion for the first time in 2021, led by Samsung Electronics.
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