On Monday, Susquehanna maintained a positive outlook on shares of Micron Technology (NASDAQ:MU) with a $165.00 price target. The firm's stance is grounded in the belief that Micron's increased market share in High Bandwidth (NASDAQ:BAND) Memory (HBM) and DDR5 will bolster its earning potential, despite current softness in DRAM and NAND Average Selling Prices (ASPs).
According to InvestingPro data, Micron's stock has shown strong momentum with a 26.45% return over the past year, though current analysis suggests the stock is trading slightly above its Fair Value. The analysis suggests that competition poses minimal risk, particularly from Samsung (KS:005930), which is anticipated to require at least a year to address its DRAM and NAND technology issues.
The Susquehanna analyst pointed out that while near-term weakness in commodity DRAM and NAND ASPs has led to lowered short-term estimates for Micron ahead of its first quarter fiscal year 2025 earnings report, scheduled for December 18, 2024, the market has likely already factored these adjustments into Micron's stock valuation.
InvestingPro metrics reveal that Micron maintains a healthy financial position with a current ratio of 2.64 and operates with moderate debt levels, suggesting strong operational stability despite market fluctuations. Current valuations, including a book-based valuation of less than 2x and a forward Price-to-Earnings (PE) ratio of less than 6x, are below the 10-year average of 2x and 6x, respectively.
Further reinforcing the positive sentiment, the analyst highlighted last week's checks in Asia and their analysis, which suggest that Micron's long-term Earnings Per Share (EPS) opportunity has been strengthened. InvestingPro analysis supports this outlook, with analysts forecasting significant revenue growth of 52% for FY2025 and an EPS forecast of $9.26. Discover 12 additional exclusive ProTips and comprehensive valuation metrics with an InvestingPro subscription.
The company is well-positioned to gain market share in both HBM and DDR5, which are primarily used in server applications. This growth is expected to contribute to Micron's long-term earning power, with an EPS opportunity projected in the $10-$15 range.
Investors have expressed concerns about Samsung potentially disrupting the market with lower-priced memory products. However, Susquehanna's commentary underscores the structural diversification of the DRAM market and the shift towards a higher mix of value-added products. These products command higher margins and are areas where Samsung may not be able to compete effectively due to lagging in process technology.
In summary, the analyst conveyed that Samsung's technological challenges are not a short-term fix, which should afford Micron the opportunity to capture market share in HBM and DDR5 segments. This market share gain is anticipated to drive an upward trajectory in Micron's long-term earnings, supporting the firm's reiterated positive rating on the stock.
With impressive revenue growth of 61.59% in the last twelve months and strong market positioning as a prominent player in the semiconductor industry, Micron shows promising potential. Access the complete Pro Research Report, available exclusively on InvestingPro, for in-depth analysis and expert insights on Micron's competitive position and growth trajectory.
In other recent news, Micron Technology has been the subject of several positive analyst ratings and expectations of a recovery in the memory market. JPMorgan reiterated its Overweight rating and $180.00 price target for Micron, predicting that the company's revenue and earnings per share for the November quarter will surpass consensus estimates.
The firm also anticipates that Micron's gross margins will remain relatively stable or possibly increase by up to 50 basis points quarter-over-quarter in 2025.
Citi reaffirmed its Buy rating and $150.00 price target for Micron, emphasizing a potential recovery in the DRAM market based on supply and demand dynamics projected for calendar year 2025. TD Cowen maintained its Buy rating on Micron's stock and a price target of $135, identifying the High Bandwidth Memory (HBM) market as a promising area for Micron.
Stifel maintained its Buy rating on Micron with a steady price target of $135.00, suggesting that the current market conditions are part of a mid-cycle correction for Micron, during which the company is expected to maintain robust margins and profitability.
In other developments, Micron Technology secured a substantial subsidy of over $6.1 billion from the U.S. Department of Commerce to support domestic semiconductor manufacturing. The company also debuted its 6550 ION NVMe™ SSD, a 60TB data center SSD, the first of its kind to support E3.S and PCIe Gen5 standards. These are the recent developments in the semiconductor industry.
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