Raymond James adjusted its outlook on Micron Technology (NASDAQ: NASDAQ:MU), reducing the price target to $125 from the previous $160, while continuing to endorse the stock with an Outperform rating.
The revision follows the company's management comments at recent investor conferences, which indicated a slower near-term growth in non-HBM DRAM and NAND markets.
The analyst noted that PC and smartphone customers seem to have stockpiled inventory in advance, anticipating price hikes. The strategic move by the customers has led to an expectation of less pronounced seasonal demand in the second half of 2024. Nevertheless, the firm believes this to be a short-term issue and anticipates the DRAM upcycle to extend into the latter half of 2025.
Demand from data centers is reported to be robust, fueled by high-bandwidth memory (HBM) needs, while the rise of on-device AI is contributing to significant content growth in smartphones.
The industry's supply growth is described as disciplined, with recent capital expenditures mainly focused on HBM and clean room space. This strategic spending is seen as providing companies with additional flexibility in the event of a demand downturn.
Micron is said to be well on its path to achieving its HBM targets, and continuous improvements in yield are expected to support margin expansion. The firm maintains a positive outlook on Micron's earnings potential, citing an anticipated peak earnings per share (EPS) of $11-12, with over $2 attributable to HBM alone.
The analyst suggests that the higher peak multiple is warranted due to the secular growth prospects associated with HBM.
In other recent news, Micron Technology has seen significant developments. Mizuho Securities adjusted Micron's price target to $140, maintaining an Outperform rating, while Susquehanna reduced its price target to $175, keeping a Positive rating. Wolfe Research maintained its Outperform rating with a fixed price target of $200, highlighting the potential growth driven by Micron's High Bandwidth (NASDAQ:BAND) Memory 3E (HBM3E) products.
Micron has also resumed its stock buyback program, indicating improved market conditions. The company has made technological strides, unveiling its PCIe Gen6 solid-state drive (SSD) technology and 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, promising advancements in computer chip manufacturing. However, the United States government's potential new restrictions could limit China's ability to procure advanced artificial intelligence memory chips, potentially impacting Micron.
InvestingPro Insights
As Micron Technology (NASDAQ:MU) navigates a shifting market landscape, real-time data from InvestingPro offers a multifaceted view of the company's financial health. With a significant market capitalization of $100.52 billion, Micron stands as a substantial player in the semiconductor industry. Analysts have noted Micron's commitment to shareholder returns, as evidenced by a three-year streak of dividend increases, which is a testament to its financial stability. This dedication to investors is coupled with an anticipation of sales growth in the current year, suggesting confidence in the company's revenue prospects despite a challenging environment.
While the company operates with a moderate level of debt and its liquid assets exceed short-term obligations, Micron's gross profit margins remain a point of concern, coming in at 11.42% over the last twelve months as of Q3 2024. This is a critical metric, particularly when considering the company's pursuit of margin expansion through high-bandwidth memory (HBM) improvements. Furthermore, Micron's price has experienced a notable decline over the past three months, yet analysts predict profitability for the year ahead, which could signal a potential turnaround for the company's financial performance.
For investors seeking a deeper analysis, InvestingPro provides additional tips on Micron Technology, accessible at https://www.investing.com/pro/MU. These insights can help investors make informed decisions based on the latest market data and trends.
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