Micron (MU) Rating Upgrade to Buy from Hold, $100.
Results expected this afternoon were very good, and I am more optimistic about the guidance. I was hesitant to add or recommend buying because it looked overpriced compared to its historical average and it had doubled in the past year.
Nvidia’s comments on needing more high bandwidth memory (HBM) vendors like Samsung, suggest the Micron is more likely to have challenges meeting demand. Unlike the past year when they had to discount inventory.
With this beat and these upgrades from Wall Street analysts in Barron, I would start buying.
“Micron is likely to report continued soaring demand for “high bandwidth memory,” or HBM—parts that combine multiple DRAM chips to improve data-processing speeds.
TD Cowen analyst Krish Sankar wrote in a recent research note previewing the quarter that when it comes to Micron, “HBM remains the centerpiece of attention.” Last week, he lifted his target for the stock price to $120, from $100. He said there is a “potential scenario” where the stock can reach $150, for a gain of more than 50% from current levels.”
For the May quarter, the Street is projecting revenue of $5.98 billion, with an adjusted profit of 8 cents a share. Analysts expect the rebound to continue from there. Estimates for the August quarter now point to $6.86 billion in revenue and an adjusted profit of 81 cents a share.
FQ3-24
Revenue 6.6Bn Expected 5.8Bn
EPS $0.17 Expected $0.08
| FQ3-24 | GAAP(1) Outlook | Non-GAAP(2) Outlook |
| Revenue | $6.60 billion ± $200 million | $6.60 billion ± $200 million |
| Gross margin | 25.5% ± 1.5% | 26.5% ± 1.5% |
| Operating expenses | $1.11 billion ± $15 million | $990 million ± $15 million |
| Diluted earnings per share | $0.17 ± $0.07 | $0.45 ± $0.07 |
Wedbush analyst Matt Bryson wrote in a recent research note that recent trends in prices for both DRAM and NAND memory chips suggest Micron will beat its guidance for the quarter. Bryson, who has an Outperform rating on Micron shares, said he expects positive commentary from the company on the outlook for HBM demand.
“Since last summer, management has provided consistently optimistic commentary around anticipated progress with HBM in light of the technology being a derivative of their highly successful standard DRAM nodes,” Bryson writes.
Meanwhile, analysts say the balance between supply and demand has stabilized following a supply glut that spanned multiple quarters.
“Customer inventories have largely normalized, demand conditions across markets appear stable, and supply growth remains muted,” Raymond James analyst Srini Pajjuri wrote in a research note previewing the quarter. “In addition, HBM is a significant secular driver that could add $1.5-$2 in incremental EPS at the next peak.”
Pajjuri maintains an Outperform rating on the stock.