As Micron Technology Inc
What Happened: Stifel analyst Brian Chin upgraded Micron on Thursday from a Hold rating to a Buy rating and raised the price target from $80 to $120 as he sees the company outperforming Street estimates as DRAM supply recovers.
The Stifel analyst acknowledged electronics demand has yet to strengthen to the degree that he was anticipating, but following a series of checks, he believes DRAM supply is tightening and on a trajectory to recover by the middle of the year.
"Recent checks point to continued year-to-date recovery in DRAM fab utilization across the industry ... we view tightening conditions in the DRAM market as allowing Micron to better optimize product mix," Chin said in a new note to clients.
As DRAM supply tightens, the analyst believes Micron's gross margins will improve alongside rising average selling prices. He noted that he expects DRAM utilization to climb toward the middle of the year.
The checks did not change Stifel's near-term estimates for Micron, which is due to report quarterly earnings on March 20. Consensus estimates are calling for a loss of 28 cents per share on revenue of $5.318 billion, according to Benzinga Pro.
"We deviate most from consensus in CY25, when we anticipate very strong ASP leverage to return, based upon tight DRAM supply, increased content growth, and incremental AI demand," the Stifel analyst said: "Generative AI needs HBM, and Micron now has a seat at the table."
Stifel expects Micron's DRAM business to accelerate in 2025, driving revenue and profitability beyond the peak levels reached between 2021 and 2022.
"On this basis and buoyed by early cyclical (+increased AI secular) appeal, we see the stock breaking out to higher highs, perhaps aided by the most compelling growth-to-valuation ratio amongst larger cap 'AI' relevant stocks," Chin said.
The Stifel analyst believes Street estimates for 2025 are "well wrong and too low." Chin noted the new price target of $120 reflects a low-teens forward price-to-earnings multiple based on the firm's estimates for EPS of $10 in 2025 versus consensus estimates of about $7 of earnings.
MU Price Action: Micron shares were up 3.50% at $98.89 at the time of publication, according to Benzinga Pro.
