On Thursday, Needham, a financial services firm, adjusted its outlook on Micron Technology (NASDAQ:MU), reducing the stock's price target to $120 from the previous $140 while maintaining a Buy rating. The revision comes in response to Micron's recent financial update, which included a modest earnings beat but offered guidance that fell short of expectations due to softer demand in consumer markets and data center solid-state drives (SSDs).
According to InvestingPro data, Micron's shares are currently trading at a P/E ratio of 155, with analyst targets ranging from $70 to $250, reflecting diverse market opinions about the company's prospects.
Micron Technology, a leading provider of memory and storage solutions with a market capitalization of $115.2 billion, is facing a period of inventory digestion within consumer markets, and this trend has now extended to data center SSDs. The observed weakness is predominantly within the NAND segment.
Consequently, industry expectations for bit demand growth have been lowered for the calendar years 2024 and 2025. Despite these challenges, InvestingPro analysis shows that analysts expect significant revenue growth of 52% for fiscal year 2025, suggesting potential recovery ahead. Subscribers can access 12 additional ProTips and comprehensive financial metrics for deeper insights.
In light of these market conditions, Micron has decided to reduce its capital expenditures (CapEx) for NAND production. The company also anticipates that gross margins (GMs) will be impacted in the second and third fiscal quarters due to the challenges in the NAND sector.
Despite these headwinds, high-bandwidth memory (HBM) and data center DRAM segments are projected to remain robust, potentially mitigating some of the negative effects of the weaker NAND performance.
Needham's revised price target of $120 is based on a 2.1 times multiple of their estimated tangible book value per share for Micron's first fiscal quarter of 2027. The firm's analyst stated, "We lower our PT to $120, based on a 2.1x multiple of our F1Q27 tangible book value per share estimate." This adjustment reflects the near-term challenges faced by the company while still acknowledging the potential strengths in certain areas of its product lineup.
In other recent news, Micron Technology has been the subject of several analyst revisions following its recent earnings report. Bernstein maintained an Outperform rating on Micron, emphasizing the company's progress with High Bandwidth (NASDAQ:BAND) Memory (HBM), whose revenue more than doubled quarter-over-quarter.
Micron's management raised its Total (EPA:TTEF) Addressable Market (TAM) estimate for HBM to over $30 billion by 2025. However, Micron's second fiscal quarter guidance fell short of expectations due to a slowdown in enterprise solid-state drives (eSSD), leading to a 9% quarter-over-quarter decline in revenue.
JPMorgan revised its price target for Micron, reducing it to $145 from $180, while maintaining an Overweight rating. The firm noted robust DRAM bit shipments and a significant improvement in DRAM pricing, which compensated for weaker NAND bit shipments and pricing.
Despite a lower revenue outlook for the next quarter, Micron's gross margin is projected to decrease by only 100 basis points quarter-over-quarter, suggesting continued rise in DRAM pricing.
Wolfe Research and Stifel also adjusted their price targets for Micron to $175 and $130 respectively, with both firms maintaining a positive outlook. They noted the robust narrative for Micron's DRAM and the impact of HBM on the company's earnings. Raymond (NS:RYMD) James, while reducing its price target to $120, maintained an Outperform rating, highlighting the potential of HBM as a significant growth driver.
These recent developments indicate a mixed but optimistic outlook for Micron's future, with a strong emphasis on the growth potential of HBM and the stability of server DRAM.
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