On Thursday, JPMorgan upheld a positive outlook on Micron Technology (NASDAQ:MU) shares, maintaining an Overweight rating and a $180.00 price target. The firm's endorsement follows Micron's announcement of better-than-expected financial results for the August quarter, which included revenue, gross margins, and earnings per share exceeding market anticipations.
The upbeat guidance for the following quarter suggests a 12% quarter-over-quarter increase in revenues, surpassing the lower consensus expectations and aligning closely with JPMorgan's optimistic forecast. This projection is supported by a rebound in server, enterprise, and cloud demand, as well as accelerating contributions from high-bandwidth memory (HBM) and artificial intelligence (AI) revenue, coupled with ongoing price increases across product mixes.
Micron's strategic shift towards high-value products, such as HBM, high-density DRAM, and enterprise solid-state drives (eSSD), has led to a diminishing reliance on DDR4 products, which traditionally faced commodity DRAM weakness. The company's favorable supply and demand dynamics are expected to continue through the remainder of 2024 and into 2025, propelled by strong AI server demand and a tight supply environment for leading-edge technology.
The semiconductor manufacturer has also raised its 2025 market forecast for HBM by 25%, from $20 billion to $25 billion, and is positioned to capture a significant market share in line with its overall DRAM market share by the same year. Micron's revenue from HBM is anticipated to reach multiple billions of dollars in fiscal year 2025, a substantial increase from the hundreds of millions reported in fiscal year 2024.
In addition to product mix improvements, Micron is advancing its technology with HBM3E and the next-generation HBM4, which are expected to enhance the company's profitability and drive capital expenditures to approximately $14 billion, or mid-30% of revenue, in fiscal year 2025.
JPMorgan's analysis indicates that the memory industry is in the early stages of an up-cycle, where earnings per share estimates and stock prices tend to rise significantly. As Micron continues to demonstrate strong revenue, margin, and earnings growth, JPMorgan predicts that the stock will outperform through 2024 and into 2025.
In other recent news, Micron Technology reported a robust close to fiscal year 2024, with a 60% annual revenue increase and expectations for continued strength into fiscal 2025. The company achieved record revenues in its NAND and storage businesses, bolstered by advancements in 1-beta DRAM and G8/G9 NAND technologies. Morgan Stanley has raised its price target for Micron to $114, maintaining an Equalweight rating, while Stifel upgraded its price target from $175 to $200, endorsing a Buy rating. Both firms highlighted Micron's strong performance and favorable financial health.
Micron Technology also announced plans to expand its manufacturing footprint with new facilities in Idaho, India, and China. The company anticipates a record quarterly revenue for fiscal Q1 2025, driven by high-volume production of advanced technology nodes and strong demand from data centers. Micron's financial health remains strong, with $9.2 billion in cash and investments, and $11.7 billion in liquidity. The projected non-GAAP EPS for fiscal Q1 is $1.74.
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