On Monday, Baird increased its price target on shares of Micron Technology (NASDAQ:MU) to $172 from $150, maintaining an Outperform rating. The firm's analyst highlighted the strong DRAM pricing as a significant factor for the company's growth, with an expected increase in 8GB DDR4 DIMM contract pricing by 23% in the second quarter quarter-over-quarter (QoQ), 8% in the third quarter, and 5% in the fourth quarter.
Additionally, spot pricing is anticipated to rise from a low single-digit percentage QoQ in the second quarter to a mid-teen percentage in the fourth quarter, suggesting an acceleration that bodes well for contract pricing into calendar year 2025.
Baird's analysis indicates that a 30x price-to-earnings (P/E) ratio is justified for Micron's projected high bandwidth memory (HBM) exposure by the end of next year. The firm forecasts that if HBM revenue constitutes 20% of Micron's total DRAM by the end of calendar year 2025, this could potentially contribute $3 in earnings per share (EPS) in fiscal year 2026.
The valuation comprises $90 based on the HBM EPS contribution and $82 on $9 of EPS for the remainder of the business. This latter figure uses a 9.1x P/E, which was Micron's trough P/E at its last peak annualized post-formation (PF) earnings, including stock compensation, of $9.87 in the third fiscal quarter of 2022.
Micron Technology, a leader in the semiconductor industry, is poised to benefit from the robust pricing trends in the DRAM market. The firm's analysis suggests a favorable outlook for Micron's financial performance, leading to the raised price target. The company's stock performance and future earnings will be closely watched by investors as these projections unfold over the upcoming quarters and into the next fiscal year.
In other recent news, Micron Technology has been the subject of various analyst actions and legal developments. Citi has maintained a Buy rating and increased the price target for Micron's shares to $175, expecting the company to surpass consensus forecasts in its forthcoming third-quarter fiscal year 2024 results. This anticipation is fueled by the ongoing upturn in the DRAM market and Micron's growing involvement in AI memory technologies.
However, Aletheia Capital has downgraded Micron's stock from Buy to Hold due to concerns over the execution of Micron's High Bandwidth (NASDAQ:BAND) Memory 3E (HBM3E). Despite this, Wells Fargo, Fox Advisors, Stifel, and UBS have all increased their price targets for the company, reflecting confidence in its earning potential.
In legal news, Micron has been ordered to pay $445 million to Netlist (OTC:NLST) in a patent dispute, a decision that could potentially triple due to the finding of willful infringement. Furthermore, the New York Independent Grid Operator has raised concerns about potential energy supply shortfalls, which could affect energy-intensive projects like the Micron NY Semiconductor plant.
InvestingPro Insights
With Baird's upgraded price target for Micron Technology (NASDAQ:MU) based on strong DRAM pricing trends, InvestingPro data and tips provide further insights into the company's financial health and market position. As of the last twelve months as of Q2 2024, Micron's market capitalization stands at a robust $154.52B, reflecting its significant presence in the semiconductor industry. Despite a challenging period with a negative revenue growth of -20.6%, the company has shown remarkable resilience with a 115.01% return over the last year.
InvestingPro Tips highlight that Micron has consistently raised its dividend for the past three years, signaling confidence in its financial stability and commitment to shareholder returns. Additionally, analysts are optimistic about the company's sales growth in the current year, which aligns with Baird's positive outlook on Micron's DRAM pricing and potential earnings per share contributions. Moreover, with 10 analysts revising their earnings upwards for the upcoming period, there's a strong sentiment that Micron's financial trajectory is on the upswing.
Investors considering Micron Technology can further explore these insights and find additional InvestingPro Tips by visiting https://www.investing.com/pro/MU. For those looking to delve deeper, use the coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking a wealth of investment intelligence including 15 additional InvestingPro Tips for Micron Technology.
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