On Thursday, Stifel adjusted its outlook for Micron Technology (NASDAQ:MU) shares, increasing the price target to $140 from $120 while reaffirming a Buy rating. The revision follows Micron's fiscal second quarter 2024 results and third quarter outlook, which surpassed expectations.
The analyst cited several factors for the optimistic stance, including tight supply conditions, particularly for DDR5/HBM DRAM, and a decline in memory wafer capacity. Additionally, the ramp-up of Micron's high-margin, AI-driven HBM3E product was highlighted as a positive influence.
The company's forecast for record revenues in fiscal year 2025 was a significant point of interest. The conditions for strong average selling price (ASP) and margin expansion appear favorable, given the long lead times required to bring new capacity to market. This suggests a durable upcycle for Micron.
The potential for on-device AI technology to trigger a replacement cycle for PCs and smartphones was also noted as a factor that could further bolster Micron's business.
Stifel's analysis suggests that Micron's cycle-to-cycle growth outlook has improved, and the company's focus on AI-driven products adds to its growth-at-a-reasonable-price (GARP) appeal.
This warrants higher valuation multiples, according to the firm. The updated price target of $140 is based on 14 times Stifel's estimated earnings per share (EPS) for the calendar year 2025.
Micron's performance and forward-looking statements have solidified Stifel's previous upgrade. The firm's earnings estimates for fiscal year 2025 and calendar year 2025 remain largely unchanged despite the heightened price target. This indicates confidence in Micron's potential to maintain its growth trajectory and capitalize on favorable market conditions.
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