Analysts revise Micron stock price targets amid post-earnings decline

Shares of Micron Technology fell in early Thursday trading after a rare double downgrade for the AI ​​memory chip maker as it continues to suffer through a long summer slump.

Micron (MU) which has outperformed its chipmaking rivals as well as the broader tech sector this year, is looking to capitalize on increased investment in artificial intelligence through its high-bandwidth memory chips.

The group reported solid earnings in its fiscal third quarter in June and said sales in the current quarter would rise 90 percent from the year-ago period to about $7.6 billion.
The numbers partly reflected demand for its new HBM3E chips, which are now integrated into Nvidia. (NVDA) H200 processors and its newly developed Blackwell systems.

Micron also told investors it expects to generate “several billions of dollars in revenue from HBM in fiscal 2025,” which ends next August. The company added that its share of the new emerging market will be “commensurate with our overall DRAM market share” sometime next year.

Still, the stock has fallen more than 40% since that late-June update, thanks in part to concerns about high valuations for AI-related chip stocks and the huge amounts of capital spending needed to meet production and demand forecasts .

Shares of Micron Technology have lost more than $70 billion in market value since their peak in late June.

Micron is seeing a sharp increase in capital spending

Capital spending will need to increase significantly, however, to allow for this kind of production ramp-up. And Micron, which estimates capital spending of about $8 billion for the current fiscal year, sees that figure rising to roughly “the 30% revenue range for fiscal 2025.”

At current forecasts, this would translate to $13.5 billion in investment, an increase of nearly 70% from FY2024 levels.

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Exane BNP Paribas analyst Karl Ackerman, who issued a rare double downgrade on Micron shares, taking his rating to “underperform” expects the group’s poor performance to continue.

“While some investors are aware of the risk of near-term underperformance, we believe Micron will underperform its AI peers through 2025 due to a glut of high-bandwidth memory, leading to a faster-than-expected correction in conventional DRAM selling prices. Ackerman said.

“Our revenue estimates for 2025 and 2026 are 34% and 45% below consensus, respectively,” he added.

Ackerman also cut his price target on Micron stock by $73 to $67 a share.

Raymond James: Micron DRAM cycle ‘has legs’

Meanwhile, Raymond James analyst Srini Pajjuri cut her Micron price target in a note on Thursday to $125 from $160, while maintaining her outperform rating.

The analyst was more bullish on the group’s near-term performance, arguing that weakness was priced into the stock and the new DRAM cycle “has legs”.

Other analysts argued that Micron will be able to generate better pricing power for legacy DRAM memory chips due to HBM development and market share gains.

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Micron’s DDR5 random-access memory, released in 2020, also offers more performance with less power than its predecessors, while SSDs are used in flash-memory storage on laptops and desktop computers.

“We are at the beginning of a multi-ear race to enable artificial general intelligence, or AGI, that will revolutionize all aspects of life,” Chief Executive Sanjay Mehrotra told investors in June.

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“AI will penetrate to the edge through AI computers and AI smartphones, as well as intelligent automobiles and intelligent industrial systems,” he added.

“These trends will drive significant growth in demand for DRAM and NAND, and we believe Micron will be one of the largest beneficiaries in the semiconductor industry of the multi-year growth opportunity driven by AI.”

Micron shares were marked 3.4% lower in premarket trading to indicate an opening price of $87.60 each.

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