BMO upgrades Micron (NASDAQ: MU)
“After some time on the sidelines, the core of our positive thesis is due to the potential we see for a continued constrained supply environment into 2022, driven by a combination of supply dynamics/CapEx discipline, and demand drivers,” BMO’s Ambrish Srivastava wrote in a note.
According to the bank, a lack of chip inventory will continue to drive up prices, while demand for semiconductors will remain strong.
BMO upgraded the semiconductor stock from market perform to outperform. In addition, the firm raised its price target to $110 from $90. The new price represents a 32.6 percent increase over the stock’s Tuesday closing price of $82.93.
Srivastava noted that while chip demand from the personal computer sector appears to be slowing, appetite in the data-center, artificial intelligence-based server, and mobile segments should compensate for the slowdown.
“We believe that, while these concerns are valid, they will most likely be short-term in nature given our longer-term thesis on both supply and demand,” Srivastava said.
Kratos Defense & Security (NASDAQ: KTOS)
Kratos is the firm’s fourth-largest holding in ARKQ, its “autonomous technology & robotics” ETF.
ARKQ added 62,520 shares of Kratos on Monday and 854,010 shares last month, bringing the fund’s total holdings to 6.9 million shares. Among ARKQ’s top holdings by weight, Kratos is trailed only by Tesla, JD.com, and Trimble.
Kratos’ stock rose 7.8 percent on Tuesday. In addition, the stock has increased by more than 90% in the last year.
Although Goldman Sachs recently stated that Kratos’ space and satellite unit accounts for the majority of the company’s total revenue, the company’s business focuses on growing its autonomous tactical drone programs.
The company is the world leader in the development of target drones, which are unmanned aerial vehicles used by the military for target practice.
In a recent note, Goldman Sachs analyst Noah Poponak wrote, “Kratos expects solid growth in this product line next year as multiple programs move… into full rate production.”
The company is investing in a variety of areas that the Pentagon considers to be the next generation of warfare, such as autonomous drones, spacecraft, hypersonics, and laser-based weapons systems. Canaccord Genuity also highlighted Kratos as a strength, citing the Pentagon’s recent “focus on innovation in the defense budget.”
“After a very strong 2020,” Canaccord Genuity analyst Ken Herbert wrote in a note to clients earlier this month, “[Kratos] stock has significantly underperformed this year, and we believe there are multiple potential [second half 2021] and 2022 positive catalysts.”