On Thursday, Baird, a financial services company, adjusted its outlook on Micron Technology (NASDAQ:MU), reducing the price target to $130 from the previous $150 while retaining an Outperform rating on the stock.
According to InvestingPro data, Micron's stock currently trades at $103.90, with a P/E ratio of 155.14, suggesting premium valuation levels. The revision reflects a more cautious stance due to further weakening in the market, particularly in the NAND sector, following a noticeable drop in demand over the summer months.
The Baird analyst pointed out that Micron's forecast indicates a continued decline in macro trends. This is especially evident in the NAND market, which has experienced recent downturns. Despite current challenges, InvestingPro analysis shows strong revenue growth of 61.59% in the last twelve months, with analysts expecting continued sales growth this year.
The expectation is that DRAM pricing will fall until the middle of calendar year 2025, primarily due to softness in the PC and mobile sectors, with a potential modest recovery in the second half of 2025.
Despite the downward trend in DRAM prices, Baird remains optimistic about Micron's earnings potential. The firm projects that Micron's High Bandwidth (NASDAQ:BAND) Memory (HBM) will contribute to an annualized earnings per share (EPS) run rate of $3 by the end of 2025, while InvestingPro forecasts EPS of $9.11 for FY2025.
The analyst highlighted the significant compound annual growth rate (CAGR) for HBM, which is reminiscent of the early days of NAND but with a higher gross margin profile. InvestingPro subscribers can access 12+ additional key insights about Micron's financial health and growth prospects through the comprehensive Pro Research Report.
In addition to the EPS forecast, the total addressable market (TAM) for HBM has been increased for calendar year 2025. This suggests that despite the current market challenges, Baird sees growth opportunities for Micron's HBM products in the coming years.
The Outperform rating indicates that Baird's analyst believes Micron's stock will perform better than the average return of the stocks analyzed by the firm. The new price target of $130, although lower than before, still suggests a positive outlook for the company's financial performance.
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