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Analysts Raise Micron Price Targets After Earnings Beat, Despite Stock Decline

Micron Technology reported fiscal Q2 earnings and revenue that substantially exceeded forecasts, propelled by strong AI-driven demand. However, the stock declined as investors reacted to elevated capital expenditure guidance. In response, the majority of Wall Street analysts raised their price targets, citing long-term strategic agreements and persistent supply constraints in the memory market. While optimism is high due to AI's impact, some firms warn of potential oversupply risks in 2027 and the cyclical nature of the industry. Overall, the outlook remains positive but with noted volatilities.

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Analysts Raise Micron Price Targets After Earnings Beat, Despite Stock Decline

Micron Technology reported robust fiscal second-quarter results driven by AI demand, but its stock fell due to higher capex guidance. Despite this, most analysts upgraded their outlooks, citing strategic agreements and tight supply.

Earnings Surpass Estimates

  • Micron announced earnings of $12.20 per share and revenue of $23.86 billion, both significantly beating consensus estimates.
  • Revenue nearly tripled year-over-year, with cloud memory business up 160%.
  • Guidance for the current quarter also exceeded analyst expectations.
  • Demand from AI, particularly from Nvidia, was a key driver.

Stock Reaction and Capex Concerns

  • Shares dropped over 6% in premarket trading following the earnings report.
  • CEO Sanjay Mehrotra indicated capital expenditures will "step up meaningfully," with construction costs exceeding $10 billion.
  • Bernstein analyst Mark Li estimated FY2027 capex could reach $30 billion.
  • Analysts linked the stock decline to profit-taking after a strong run and concerns about peak gross margins.
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Analyst Upgrades and Rationale

Multiple firms raised price targets, highlighting:

  • Bank of America: Buy rating, target $500 (from $400). Cited memory pricing staying elevated due to AI, 5-year SCA, and limited cleanroom space.
  • UBS: Buy, target $510 (from $475). Emphasized multiyear strategic priority for memory supply assurance.
  • Citi: Buy, target $510 (from $430). Noted investor debate on stock sustainability with DRAM prices.
  • Bernstein: Outperform, target $510. Pointed to supply tightness beyond 2026.
  • Morgan Stanley: Overweight, target $520 (from $450). Called memory a key bottleneck for AI spending.
  • JPMorgan: Overweight, target $550 (from $350). Focused on revenue growth and operating leverage.
  • Wells Fargo: Overweight, target $550 (from $470). Based on expanding role of memory in AI infrastructure.
  • Deutsche Bank: Buy, target $550 (from $500). Acknowledged cycle fears but saw resilient margins.
  • Barclays: Overweight, target $675 (from $450). Highlighted blowout quarter and 5-year SCA for stability.
  • Goldman Sachs: Neutral, target $400 (from $360). Warned of potential supply additions in 2027.

Strategic Customer Agreements and Market Dynamics

  • Micron signed its first 5-year Strategic Customer Agreement (SCA), compared to typical 1-year LTAs.
  • Analysts view this as a shift, treating memory as a strategic asset rather than a commodity.
  • JPMorgan's Harlan Sur noted the change in customer approach.
  • Morgan Stanley emphasized that AI consumption has eliminated slack in DRAM supply.

Cautionary Notes

  • Some analysts caution that memory pricing cycles may peak, with spot prices stabilizing.
  • Goldman Sachs remains neutral due to expected supply increases in 2027.
  • Deutsche Bank acknowledged bear case risks but believes demand growth will outpace historical levels.
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