Micron Price Target (MU) Reaffirmed With Earnings On Deck

Micron Technology is due to report earnings after markets close on Weds (18th Dec), with plenty of eyes on a stock which has pulled back almost 30% from 2024's highs. Despite the pullback, Micron's stock price (NASDAQ: MU) remains an outperformer on a YTD basis, with gains of 33.4%. What are markets, and analysts expecting?

$1.77 in EPS, coming against revenue of $8.71 billion. This would represent a substantial improvement from the previous report at $1.18 (on revenue of $7.75 billion).

With Micron having beat on both top and bottom lines over at least the last four quarters, Citi are expected the firm to deliver a mild miss owing to legacy DRAM weakness. The analysts' reaffirmation of its Buy rating and a substantial price target of $150.00 is a significantly perceived upside from current price action.

Micron Technology, with a current market capitalization exceeding $113 billion has had legacy DRAM contributing to 30% of Micron's fiscal year 2024 sales.

Excess inventory within the DRAM market, especially affecting the PC and handset sectors, is projected to stabilize by spring. This normalization could alleviate some pressure from DRAM sales performance. Additionally, demand from the data center segment, which constituted 35% of Micron's sales in fiscal year 2024, is anticipated to help counterbalance the weaker performance in other areas.

Moreover, Micron has shown impressive revenue growth of 61.6% over the past twelve months. The company's financial health appears robust, with a current ratio of 2.64 and manageable debt levels, reflecting its sound fiscal standing. In a strategic move, Micron acquired a subsidy of over $6.1 billion from the U.S. Department of Commerce for semiconductor manufacturing infrastructure improvements in New York and Idaho.

Multiple analysts, including those from TD Cowen, Stifel, and Wells Fargo, have expressed positive sentiments regarding Micron's future stock performance. The High Bandwidth Memory (HBM) market is expected to drive substantial revenue growth, predicted to increase by 52% in FY2025. Additionally, positive investor sentiment in the semiconductor sector, fueled by Broadcom's 220% annual AI revenue surge, further bolsters Micron's potential outlook.

While challenges such as excess DRAM inventory persist, Micron's strategic positioning, diversified sales channels, and expected growth in the data center and HBM markets position it well for future success. The potential for a DRAM market recovery in 2025 remains a pivotal point of interest for investors.