On Wednesday, Mizuho Securities exhibited confidence in Micron Technology (NASDAQ:MU) by increasing the stock's price target to $145 from $140, while retaining an Outperform rating. The adjustment follows an evaluation of the High Bandwidth (NASDAQ:BAND) Memory (HBM) market, which is expected to experience significant growth due to the demand driven by artificial intelligence (AI) advancements.
The firm anticipates the HBM market to expand approximately sixfold year-over-year to around $25 billion by 2025 and projects it to approach $35 billion by 2026. Micron is poised to benefit from this surge, with revenue from HBM3e potentially increasing 10 to 20 times to reach $2 to $5 billion between 2025 and 2026. This growth is seen despite some major Dynamic Random-Access Memory (DRAM) suppliers falling behind in HBM3e qualifications.
Micron, along with SK Hynix, is expected to gain a significant competitive edge as other key DRAM suppliers struggle to gain traction in the HBM supply market. Additionally, the demand for AI servers is forecasted to double the average HBM content per Graphics Processing Unit (GPU) from 100 GB in 2023 to approximately 200 GB by 2025. This trend is likely to act as a catalyst for both the semiconductor capital equipment sector and Micron's business.
While maintaining the Outperform rating for Micron, as well as for Seagate Technology (NASDAQ:STX) and Western Digital Corporation (NASDAQ:WDC), Mizuho has adjusted its estimates for Micron. The new price target reflects a decrease from a previous target of $155, attributed to lower market multiples amidst a recent pullback in the AI sector. Despite this, the firm remains optimistic about Micron's growth trajectory in the coming years.
In other recent news, Micron Technology has seen a series of adjustments to its price target by various analyst firms. Mizuho Securities trimmed its price target from $145 to $140, maintaining an Outperform rating. The firm highlighted a positive outlook on the DRAM and NAND markets towards 2025, particularly noting the growth of High Bandwidth Memory (HBM) and an improving price environment for conventional DRAM.
Susquehanna also maintained a Positive rating but reduced the price target to $175 from $185, factoring in Micron's recent update on their November quarter DRAM and NAND bit shipments. Wolfe Research, on the other hand, held its price target steady at $200, citing potential growth driven by Micron's High Bandwidth Memory 3E (HBM3E) products.
Micron Technology has also resumed its stock buyback program, signaling improved market conditions. The company unveiled its PCIe Gen6 solid-state drive (SSD) technology and started shipping its ninth-generation (G9) triple-level cell (TLC) NAND solid-state drives (SSDs), marking an industry first with the highest transfer speed of 3.6 GB/s.
In collaboration with ASML (AS:ASML), Micron ordered the "High NA" tool, which promises advancements in computer chip manufacturing. However, new restrictions being considered by the United States government could limit China's ability to procure advanced artificial intelligence memory chips, potentially impacting Micron.
InvestingPro Insights
In light of Mizuho Securities' updated outlook for Micron Technology, it's worth considering the latest InvestingPro data and tips to gain a broader understanding of the company's financial health and market position. According to InvestingPro, Micron has a market capitalization of approximately $98.22 billion, reflecting its substantial presence in the semiconductor industry. While the company has been experiencing revenue growth of 17.6% over the last twelve months as of Q3 2024, it is currently operating at a loss, with an operating income margin of -7.75%.
InvestingPro Tips highlight Micron's resilience and potential for recovery. Analysts expect the company to return to profitability this year, and Micron's liquid assets are reported to exceed its short-term obligations, indicating a solid liquidity position. Moreover, Micron has raised its dividend for three consecutive years, which could be appealing to income-focused investors. On the flip side, the company does suffer from weak gross profit margins, which is an area investors may monitor closely.
These insights, coupled with the 26 additional InvestingPro Tips available for Micron (https://www.investing.com/pro/MU), can provide investors with a more nuanced view of the company's prospects. As Micron navigates the expanding HBM market and capitalizes on AI advancements, these financial metrics and expert analyses could be instrumental in shaping investment strategies.
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