On Monday, BofA Securities adjusted its outlook on Micron Technology (NASDAQ:MU), increasing the price target to $144 from the previous $120 while maintaining a Buy rating on the stock. The new target reflects an anticipation of growth driven by demand for high-bandwidth memory (HBM), which is becoming increasingly important for artificial intelligence (AI) applications.
Micron Technology, listed on NASDAQ:MU, is expected to see a surge in its market share for HBM, which is a significant component in AI technology. The HBM is noted for consuming three times more wafer than traditional DDR DRAM memory, indicating a substantial increase in raw material use.
BofA Securities projects that the demand for HBM will grow at a compound annual growth rate (CAGR) of 48% from the calendar year 2023 to 2027, potentially leading to a market worth over $20 billion.
The firm anticipates that Micron Technology will increase its market share in the HBM sector to the mid-20s percent, a substantial rise from its current share of less than 5%. This expansion is expected to contribute to record overall company sales in the calendar years 2025 and 2026.
The growth in memory demand is not limited to traditional computing platforms. The memory industry is also set to benefit from the proliferation of AI across various devices, including higher-specification smartphones, personal computers, and a range of smart and connected devices. This expansion of AI to the edge of the network is likely to further stimulate the demand for advanced memory technology.
The revised price objective of $144 is based on an updated price-to-book (P/B) multiple of 2.8 times the calendar year 2025 estimates, which is an increase from the prior multiple of 2.2 times. However, it is noted that this valuation remains within the historical range of 0.8 to 3 times.
InvestingPro Insights
As Micron Technology (NASDAQ:MU) positions itself to capitalize on the burgeoning demand for high-bandwidth memory, a critical look at real-time data and InvestingPro Tips can provide a clearer picture of the company's current performance and future prospects. Micron has raised its dividend for three consecutive years, signaling confidence in its financial stability and future cash flows. Additionally, analysts are forecasting sales growth in the current year, which aligns with BofA Securities' growth expectations driven by AI applications.
The recent performance metrics from InvestingPro reveal a mixed picture. Despite a challenging last twelve months with a reported -20.6% revenue growth, the quarterly figures show a remarkable 57.7% growth, suggesting a potential turnaround. The company's market capitalization stands strong at $130.55 billion, yet it operates with a negative P/E ratio of -34.37, indicating that investors are likely factoring future growth rather than current earnings into the stock price. Furthermore, the dividend yield is modest at 0.39%, which may appeal to income-focused investors.
For those interested in a deeper dive into Micron's financial health and market potential, InvestingPro offers additional insights, including the fact that the company is trading near its 52-week high and analysts predict it will be profitable this year. To explore these insights and more, visit https://www.investing.com/pro/MU and remember to use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription, which includes over 15 additional InvestingPro Tips to guide your investment decisions.
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