On Thursday, JPMorgan (NYSE:JPM) revised its price target for Micron Technology (NASDAQ:MU), reducing it to $145 from $180, while keeping an Overweight rating on the stock.
The adjustment comes after Micron reported its November-quarter earnings, with revenue meeting expectations and earnings per share slightly surpassing forecasts. The strong performance was attributed to robust DRAM bit shipments and a significant improvement in DRAM pricing, which compensated for the weaker NAND bit shipments and pricing.
Micron's data center revenue mix, including High Bandwidth (NASDAQ:BAND) Memory (HBM), server DRAM, and enterprise SSD, saw a 40% growth quarter-over-quarter and accounted for more than half of the total revenues. This growth is seen as a reflection of Micron's market share gains in HBM and enterprise SSDs, coupled with strong demand for AI applications.
However, the company's revenue guidance for the February quarter was set 9% lower quarter-over-quarter, falling short of expectations due to anticipated challenges in consumer markets such as PCs and smartphones, which are expected to impact NAND shipments and average selling prices (ASP).
Despite the subdued revenue outlook for the February quarter, Micron's gross margin is projected to decrease by only 100 basis points quarter-over-quarter, suggesting that DRAM pricing will continue to rise due to a strong data center product mix.
The company has also seen a significant increase in HBM revenue, with expectations for continued momentum through FY25. Micron's management has increased its 2025 HBM market forecast by 25% and anticipates substantial growth in the HBM Total (EPA:TTEF) Addressable Market (TAM) by 2028 and beyond.
Micron has reaffirmed its goal to grow HBM revenue from several hundred million dollars in FY24 to multiple billions in FY25, expanding its customer base and gaining share on key platforms, including those of NVIDIA (NASDAQ:NVDA). The company plans to spend $14 billion on capital expenditures in FY25, focusing on greenfield fab investments for DRAM and expanding back-end HBM capacity, while moderating NAND capital expenditures.
"Despite the near-term weakness, we continue to believe the down-cycle in memory will be short-lived and expect market conditions to improve in the latter part of 2025 as leading-edge DRAM supply remains tight and strong AI server demand continues to drive growth in HBM/DDR5," analysts at JPMorgan said.
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