MU - Wolfe Research sets $200 target for Micron: Can it hit the mark?
2024-06-24 11:07:58 ET
Micron Technology Inc. (NASDAQ:MU) has recently garnered significant attention from analysts and investors alike, with a flurry of bullish ratings and raised price targets. Wolfe Research has notably set a new target of $200 for Micron’s stock, an increase from its previous target of $150.
This optimistic outlook comes amid a flurry of positive developments and increasing optimism about the company’s future prospects in the burgeoning artificial intelligence (AI) market.
Optimism in High Bandwidth Memory (HBM)
Wolfe Research’s confidence in Micron isn’t solely based on short-term market conditions. The firm anticipates robust demand for HBM, which is crucial for AI and data-intensive applications.
This demand is expected to tighten supply and push up prices for DRAM, Micron’s staple product. Wolfe’s analysis suggests that HBM could significantly contribute to Micron’s earnings power, potentially driving its EPS to $20 by CY25/26.
Earnings expectations
Micron is set to release its fiscal Q3 earnings report, with analysts forecasting a 78% year-over-year revenue increase. The surge is primarily attributed to the booming demand for memory chips in AI applications.
The company has already raised its capital spending forecast for the year to $8 billion, reflecting its commitment to expanding AI-related memory production. Consensus estimates point to an EPS of $0.52 and revenue of $6.67 billion,
with expectations that Micron will continue its trend of beating estimates, having done so in six of the past eight quarters.
Analysts’ views and ratings
Citi has also reiterated its Buy rating on Micron, elevating its price target to $175. The firm anticipates that Micron’s earnings and guidance will surpass consensus due to the DRAM upturn and increased AI memory exposure.
UBS and BofA Securities have also expressed bullish views, with the latter adding Micron to its US 1 List, highlighting it as one of the firm’s top investment ideas.
Micron’s stock has surged 64.7% year-to-date, reflecting investor optimism and strong market performance.
Despite this significant run-up, most analysts believe that Micron could continue to trade at a premium to its historical valuation range, driven by its critical role in the AI memory market.
The company’s strategic investments in next-generation memory technologies are expected to yield substantial returns, further justifying its elevated valuation.
The broader semiconductor industry, including the memory segment, has faced considerable challenges and opportunities. April sales figures were below seasonal averages, yet analysts remain bullish on the sector.
The industry’s recovery is supported by inventory replenishment and rising prices, particularly for DRAM and NAND memory. Micron, alongside other memory suppliers, is strategically constraining supply to manage inventory levels and capitalize on expected price increases.
Micron is well-positioned to benefit from the ongoing AI revolution. The company’s HBM3E production is set to boost sales significantly in the latter half of 2024 and into FY2025.
As AI servers and data centers continue to expand, demand for Micron’s high-performance memory products is expected to soar.
The firm’s strategic focus on AI infrastructure aligns with broader industry trends, promising robust growth and increased market share.
Automotive and consumer electronics
Beyond AI, Micron is also making strides in the automotive sector, providing advanced memory solutions for driver-assist systems.
Although the automotive market is expected to remain relatively flat, Micron’s contributions to digital and AI-enabled automotive platforms may drive incremental growth.
In consumer electronics, the focus is on AI PCs and smartphones, with Micron’s next-gen memory products offering significant power savings and performance improvements.
Now, let’s see what the charts have to say about the stock’s price trajectory.
This technical analysis will delve into the price movements, key levels, and potential trends for Micron, providing a comprehensive outlook on whether the stock can hit the $200 mark.
All-Time high and subsequent retracement
Before this recent rally that began in October last year, Micron’s stock was stuck in a $50-$70 range for more than a year.
In the current rally, the stock has made an all-time high at $157.54, but quickly retraced from there.
On the daily charts, we can see bearish reversal candle formation last week, which is not a good signal for the bulls.
If the stock continues to trade below $140, the short-term momentum will shift from bullish to bearish. Hence, investors considering a long position in the stock must wait for the stock to stabilize before initiating a position.
Traders who are bearish on the stock can consider a short position near $140 with a stop loss at $148.6. If the bearish momentum intensifies, the stock can fall to its April lows below $110, where one can book profits.
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