High-Conviction Stocks to Watch: Mizuho Adds Micron and Oracle to Top Picks List for September 2023
Mizuho's September Stock Picks: Micron, Oracle, and More
In a strategic move to capitalize on emerging market trends, Mizuho analysts have refreshed their Top Picks List for September. This update features the inclusion of Micron Technology (NASDAQ: MU) and Oracle Corporation (NYSE: ORCL), both of which are poised for substantial growth driven by key industry catalysts. Other noteworthy additions include Coterra Energy (NYSE: CTRA), PG&E Corporation (NYSE: PCG), Terns Pharmaceuticals Inc (NASDAQ: TERN), and Universal Health Services (NYSE: UHS).
Why Micron and Oracle Stand Out
Micron Technology (MU): Riding the AI Wave
Mizuho analysts have high expectations for Micron, a key player in the AI revolution. Micron specializes in memory chips, such as DRAM and NAND, which are critical for AI applications. The investment bank anticipates that Micron will benefit from improved pricing in these memory types, further bolstered by its partnership with NVIDIA (NASDAQ: NVDA). By 2025, Mizuho projects that Micron’s HBM3E memory will capture a staggering 70% of the High Bandwidth Memory (HBM) market. This growth will be driven by NVIDIA's AI GPU ramp, significantly boosting Micron's HBM market share in late 2024 and into 2025.
Furthermore, the analysts predict a surge in AI device adoption by 2025, which will double the demand for DRAM and NAND content in AI PCs and handsets compared to traditional devices. Although a yield issue with Micron’s HBM has temporarily limited margin expansion, analysts foresee considerable margin improvements by 2025 as HBM becomes a larger revenue contributor and traditional DRAM and NAND utilization rates increase.
Oracle Corporation (ORCL): Undervalued Cloud Potential
Oracle’s cloud infrastructure (OCI) is another high-conviction pick for Mizuho analysts. They believe that OCI is significantly undervalued by the market, especially considering its competitive pricing—approximately 33% cheaper than AWS. As enterprises continue to migrate from on-premise systems to the cloud, Oracle’s extensive on-prem customer base represents a robust future revenue stream. Moreover, Oracle’s industry-specific applications are uniquely positioned to capture this shift.
Mizuho’s team is also optimistic about Oracle’s ability to expand its operating margins to 45% by FY26. This growth will be driven by cloud margin expansion, improved sales and R&D efficiencies, and the benefits of increasing scale.
Breaking Down the Investment Insights
Understanding these investment opportunities might seem complex, but let's break it down:
- Micron Technology (MU): Micron is a leading producer of memory chips, which are essential for AI technologies. As AI becomes more prevalent, the demand for these chips will skyrocket, driving Micron’s growth. The company’s partnership with NVIDIA, a giant in AI hardware, further strengthens its market position.
- Oracle Corporation (ORCL): Oracle is a major player in cloud computing, offering services at a lower cost than competitors like AWS. As more companies move their data and operations to the cloud, Oracle stands to gain significantly. The company’s ability to improve its profit margins through efficient operations adds to its attractiveness as an investment.
How This Affects You
Investing in high-conviction stocks like Micron and Oracle can potentially offer substantial returns, especially as these companies are positioned to benefit from major industry trends like AI and cloud computing. Understanding these market dynamics can help you make informed decisions about where to allocate your investment funds, potentially improving your financial future.
In summary, Mizuho’s latest stock picks highlight opportunities in the booming AI and cloud sectors, with Micron and Oracle leading the charge. By staying informed and considering these high-potential stocks, you can make strategic investments that align with future market trends.