On Thursday, Mizuho (NYSE:MFG) maintained its Outperform rating on Micron Technology (NASDAQ:MU) stock but reduced the share price target to $115 from $135. According to InvestingPro data, Micron, a prominent player in the semiconductor industry with a market capitalization of $116.5 billion, is currently trading near its Fair Value.
This adjustment follows Micron's report of its November quarter results, which aligned with expectations, featuring revenue of $8.71 billion and earnings per share (EPS) of $1.79.
However, the company's guidance for the February quarter indicated a weaker than anticipated top line of $7.9 billion, falling short of the consensus estimate of $8.97 billion, amid ongoing softness in the PC and handset markets.
Despite near-term challenges, InvestingPro analysis shows strong revenue growth of 61.6% over the last twelve months, with analysts expecting continued sales growth this year. Get access to 12 more exclusive InvestingPro Tips and comprehensive analysis through the Pro Research Report.
Mizuho highlighted several key points from Micron's report, including a high single-digit percentage quarter-over-quarter increase in DRAM pricing and a low single-digit percentage decline in NAND pricing.
The firm also noted Micron's forecasted capital expenditures for fiscal year 2025, estimated at around $14 billion, which will primarily fund High Bandwidth (NASDAQ:BAND) Memory (HBM) and greenfield projects, with NAND expected to comprise about 20-25% of the mix.
Additionally, the total addressable market (TAM) for HBM is projected to double to $30 billion by calendar year 2025, with Micron anticipating a 20-25% market share, translating into multiple billions in revenue from HBM in fiscal year 2025.
Looking ahead, Mizuho expects Micron to achieve a significant increase in market share for HBM, rising to 20-25% in calendar year 2025 from approximately 5-7% currently. The analyst firm also noted that HBM is sold out for the fiscal year 2025.
The company maintains a healthy financial position with a current ratio of 2.64 and operates with a moderate debt-to-equity ratio of 0.31, according to InvestingPro data, suggesting strong capability to fund its expansion plans.
These factors contribute to Mizuho's continued positive outlook on Micron, despite the reduction in the price target to $115, which is approximately 1.9 times the fiscal year 2026 estimated price-to-book value, consistent with the prior multiple of 2.0 times.
Micron's report also included expectations for a mid-teens percentage year-over-year increase in DRAM and NAND bit demand for the year 2025. Furthermore, data center memory inventories remain healthy, while PC and smartphone original equipment manufacturers (OEMs) are experiencing pronounced corrections in the February quarter.
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