Analysts revisit Micron stock price targets ahead of Q3 earnings

AI systems need huge amounts of memory, and Micron Technology is one of the world's biggest suppliers.

Jun 24, 2024 - 19:30

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Analysts revisit Micron stock price targets ahead of Q3 earnings

Micron Technology shares moved higher in early Monday trading, extending the memory-chip maker's extraordinary year-to-date gains, following a key price target upgrade from a top Wall Street analyst.

Micron (MU ) has added around $60 billion in market value this year as investors see the group's high-bandwidth-memory (HBM) chips playing a key role in the AI-investment surge.

HBM chips are designed to be embedded in larger artificial-intelligence semiconductors, including those made by Nvidia (NVDA) , to help boost system performance and reduce power consumption.

Micron has also said that growing demand for its legacy DRAM memory products is likely to continue over the next two years.

The group will report fiscal third-quarter results after the close of trading Tuesday, with analysts looking for a bottom line of 51 cents a share on revenues of around $6.66 billion.

Sanjay Mehrotra has driven a near 400% gain in Micron shares since he was named CEO in April 2017.
MANDEL NGAN/Getty Images

Citigroup analyst Christopher Danely, who lifted his price target on Micron by $25 to $175 a share in a note published Monday, sees strong sales and improving profit margins driving better-than-expected profits.

Demand for high-bandwidth memory surges

That view echoes comments from CEO Sanjay Mehrotra, who told investors in late March that Micron is "on track to generate several hundred million dollars of revenue from HBM in fiscal 2024."

Mehrotra added that HBM revenue would be "accretive to our DRAM and overall gross margins starting in the fiscal third quarter."

South Korea-based SK Hynix, a key Micron competitor, forecast annual HBM growth demand of around 60% over the mid- to long-term and said its chips were sold out for all of this year and most of 2025.

Micron, which unveiled new 12-layer HBM3E chips earlier this year, has also allocated most of its legacy HBM semis for the coming financial year.

Danely, who carries a buy rating on Micron stock, also argues Micron "should continue to trade at a premium to its historical range given AI exposure."

Baird analyst Tristan Gerra is also bullish on Micron heading into Wednesday's earnings. He lifted his price target $22 to $172 in a note published Monday.

"We continue to see meaningful upside opportunities for Micron as DRAM pricing remains strong," Gerra and his team wrote.

Gerra sees the HBM portion of Micron's operations generating $3 a share in earnings next year, with $9 coming from the rest of the tech group's business

"A 30 times [price-to-earnings multiple] is warranted on Micron's projected HBM exposure exiting next year ... assuming HBM revenue is 20% of total DRAM exiting calendar 2025, for a potential $3 in earnings per share in fiscal 2026," Gerra said.

A risk for Micron: China export restrictions

One factor that will also prove key for Micron earnings over the coming months will be whether and how the Biden administration advances export restrictions on key AI technologies to China.

Bloomberg reported earlier this month that officials were looking to tighten rules on the sale of gate all-around, or GAA, architecture, to China-based customers, with early-stage talks on limiting HBM sales.

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GAA is similar to HBM in that it's designed to reduce power and improve performance, but it is a transistor-design technology and not a memory technology.

Micron shares were marked 2% higher in premarket trading to indicate an opening-bell price of $142.29, a move that would extend the stock's 2024 gain to around 67%.