By Senad Karaahmetovic
Micron Technology (NASDAQ:MU) shares are down over 3.5% in pre-open Friday after the company reported results Thursday.
The chipmaker offered downbeat guidance that sent shares lower before Bank of America analyst Vivek Arya followed up with a downgrade to Neutral.
However, UBS analyst Timothy Arcuri said the results report was “a big step in the right direction” for Micron.
The analyst reiterated MU stock as a Top Pick in semis and slashed the price target to $90.00 per share from $100.00.
Arcuri explained why server DRAM demand is unlikely to “significantly weaken.”
“First, even if hyperscalers pull back on capex, the server component will likely remain resilient given the growth in AI workload and the ROI for DRAM even at these prices. Second, new server platforms are on the horizon which means cloud customers will need to provision more memory for new server procurement. Third, we have heard many examples of cloud customers refurbishing older servers given component shortages - effectively creating a demand "cushion" as these shortages have quickly gone away. At the very least, this is a major step in the right direction and removes the consumer recessionary overhang on the fundamentals.”
UBS added that Micron is poised for “excess returns once we come through this phase of customer inventory adjustment.”