Micron Technology stock has stuttered in recent weeks. But Wall Street analysts are confident the company will surge higher as markets understand the scale of the memory-chip shortage over the next two years.

Micron shares were up 0.3% at $863.75 in premarket trading. However, the stock is down 12% over the past month and well short of its peak of more than $1,200 reached in late June, amid concerns about the sustainability of sky-high margins in a typically cyclical business.

Arguably very little has changed about the fundamental picture for Micron with memory prices continuing to rise. Wall Street still expects Micron earnings to increase for the next three years at least amid higher artificial-intelligence spending and it now trades at a forward price-to-earnings ratio of less than six times according to FactSet.

Mizuho analyst Vijay Rakesh sees the current slump as an opportunity. He reiterated an Outperform rating on the stock with a $1,375 target price in a research note this week, following a meeting with Micron executives.

"We believe Micron sees DRAM/NAND [memory chips] market tight well through 2027E, with any incremental real supply only coming in 2028E and still no meaningful change to supply-demand imbalance," Rakesh wrote.

Mizuho's Rakesh values Micron at a price-to-book ratio of 5.3 times his forecast for the company's book value in 2027. It currently trades at a forward price-to-book ratio of 3.4 times, according to FactSet.

Investors could become more confident about the stock if it can sustain more than 80% gross margins. Rakesh argues that is possible with its new long-term supply agreements, which have a premium for future products.

Meanwhile, there is an open question about rising supply, especially from Chinese memory-chip companies such as ChangXin Memory Technologies ( CXMT). While they are currently limited in their ability to supply U.S. companies and more advanced forms of hardware, Apple has reportedly lobbied to be allowed to buy from CXMT in the face of the shortage.

Rakesh argued that Chinese worries are "overblown" and should dissipate as it becomes clear that CXMT will focus on domestic Chinese supply and has limited capacity to move into high-bandwidth memory.