Micron Technology, Inc. (NASDAQ:MU) is an interesting stock at the moment. Micron stock has risen nearly 50% since early February — which might imply some caution. But even after those gains — and even at an all-time high — MU stock still trades at just 6 times FY18 EPS estimates, and 7 times FY19 consensus.

That’s an unusual combination: a stock that has soared and still looks ridiculously cheap. It’s a combination that suggests some short-term caution toward MU but long-term bullishness.

I’ve recommended Micron stock on this site for some time, and I still see upside ahead. But the stock’s history suggest that choppy trading — or an outright pullback — could return in the not-too-distant future.

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Near-Term Caution Toward Micron Stock

On InvestorPlace last week, James Brumley argued that the recent rally in MU looked a little overheated. And I can see Brumley’s overall point.

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Notably, analysts have swung dramatically behind MU stock of late. Brumley listed upgrades from KeyBanc, Susquehanna and Goldman Sachs. Those firms are also joined by Stifel, who raised its target to a Street-high $85 last month.

Any time analysts — or investors — move in a herd, a reversal is possible. And the enthusiasm isn’t limited to just Micron — the semiconductor space as a whole has seen quite a bit of demand of late. Both Nvidia Corporation (NASDAQ:NVDA) and Intel Corporation (NASDAQ:INTC) have risen 20% from their own early February lows.

As far as Micron stock goes, it’s a hugely cyclical company — and a highly volatile stock. MU dropped 20% in just a few sessions in late November. Going back further, between early 2013 and early 2016, Micron stock went from under $5 to $35 and then back to the single digits.

Because of the sensitivity to memory prices, and the constant fear that competitors (or Micron itself) will expand capacity and disrupt those prices, MU stock can turn rather quickly. Right now, the market is behind the stock. But Micron stock can still run out of buyers.

And with guidance for fiscal Q2 already raised once, expectations for the earnings release later this month are getting high — and maybe too high.

Long-Term, MU Stock Remains a Buy

Fundamentally, there’s a case for some caution at these levels as well. Again, this is a cyclical stock. An investor can’t take FY18 EPS estimates of $10+, or even FY19 consensus just south of $9, and apply a 15x multiple. Right now, it appears Micron earnings are at, or near, a peak.

I thought last month that fair value looked to be around $60, based on mid-cycle earnings of $3-5 per share and that ~15x multiple. And so, at $54, investors perhaps could consider taking some profits.

But increasingly, that looks too conservative. Memory prices are staying stable, as witnessed by Micron’s raised Q2 guidance.

Stifel has argued that the industry itself is different this time, with participants like Samsung learning from past errors. Demand for both NAND and DRAM is more diversified — this was an industry dependent on PC sales not that long ago. And Micron’s recent investments are helping the company compete, with its QLC solid-state drives giving it an edge over rival Western Digital Corp (NASDAQ:WDC).

The biggest risk to Micron stock, whether at $40 or $55, is that it remains a “this time is different” type of bull case.

It does look like this time is different, though. This isn’t 2014, when MU last saw peak earnings, only to have even non-GAAP profits turn negative within just a few quarters. Capacity is normalized. Demand is stronger, and more diversified.

Bottom Line for Micron Stock

Even at an all-time high, Micron stock is still cheap. It’s perhaps not as cheap as it looks, but against mid-cycle EPS that now looks to be $5+, the P/E multiple still looks to be in the low double-digits.

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Long-term, there’s still reason to see growth, and as long as the industry cooperates, little reason to see a downswing as severe as that seen in 2015-2016.

That’s more than enough to stay positive here — and to ride out any volatility that may arise. Micron stock isn’t as cheap as it was a month ago — but it’s still cheap enough.

As of this writing, Vince Martin has no positions in any securities mentioned.

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