On Thursday, Micron Technology (NASDAQ:MU) retained its Overweight rating and $135.00 price target from Wells Fargo (NYSE:WFC), following the announcement that the company will receive up to $6.1 billion in subsidies from the CHIPS Act. The funding, which includes grants and loans, will support Micron's DRAM fabrication plant expansion efforts.
The semiconductor manufacturer has tied its investment plans to meet memory demand in the latter half of the 2020s to the financial backing provided by the CHIPS Act, which includes grants and investment tax credits.
Micron began construction of a new DRAM facility in Boise, Idaho, in October 2023, with production slated to commence in calendar year 2025. Additionally, the company plans to start building a second DRAM fabrication plant in Clay, New York, next year, with production expected to ramp up in the latter part of the decade.
Micron submitted applications for CHIPS Act subsidies for both the Boise and Clay fabrication plants in August 2023. The Boise facility is projected to cost up to $15 billion. Furthermore, in October 2022, Micron announced a massive $100 billion investment plan for a megafab in Central New York, which will span over 2.4 million square feet of cleanroom space. The initial phase of this investment, amounting to $20 billion, is expected to be completed by the end of this decade.
InvestingPro Insights
As Micron Technology (NASDAQ:MU) forges ahead with expansion plans bolstered by the CHIPS Act, keeping an eye on the company's financial health and market performance is crucial for investors. According to InvestingPro data, Micron's market capitalization stands at $127.78 billion, indicating a significant presence in the semiconductor industry. Despite a challenging period with a revenue decline of 20.6% over the last twelve months as of Q2 2024, analysts have revised their earnings upwards for the upcoming period, signaling potential optimism in Micron's future performance.
InvestingPro Tips suggest that Micron has been a prominent player in its sector and has demonstrated a high return over the last year, with a notable 88.94% one-year price total return as of the latest data. Additionally, the company has raised its dividend for three consecutive years, which may appeal to income-focused investors. However, it's worth noting that Micron has been trading at high revenue and EBITDA valuation multiples, which could be a point of consideration for value investors.
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