Stifel maintains Buy rating and $130 target on Micron stock

Tuesday, Micron Technology shares are likely to stay in focus as Stifel analysts maintained a Buy rating and a $130.00 price target on the company (NASDAQ:MU). The stock has shown strong momentum with a 15.79% return over the past week, and according to InvestingPro data, the company maintains a GOOD financial health score. Ahead of Micron’s earnings report scheduled for Thursday, post-market close, Stifel’s outlook remains positive despite a reduction in fiscal third-quarter estimates, recognizing ongoing challenges in memory pricing and a shift in sales mix.

The analysts anticipate that Micron will meet the current quarter’s estimates shared by them and the general consensus. With a market capitalization of $114.88 billion and impressive revenue growth of 79.8% over the last twelve months, Micron continues to demonstrate its market strength. However, they have adjusted their expectations for the next quarter ending in May, accounting for persistent softness in memory pricing and a less favorable shift in product mix, moving from enterprise and hyperscaler demand towards consumer products.

This recalibration of expectations aligns with previous guidance from Micron’s management, which predicted a decline in gross margins for the third fiscal quarter. Nevertheless, subsequent reports suggest a more optimistic view, especially regarding the potential for improving NAND pricing starting in the second calendar quarter of the year.

Stifel’s analysts also noted some positive signals concerning memory demand, primarily originating from China. While the macroeconomic environment remains a consideration, they expect the fourth fiscal quarter, ending in August, to mark a period of re-acceleration for Micron’s key profit and loss metrics. This optimism is based on anticipated favorable pricing conditions, a seasonal and cyclical recovery in bit demand, and successful execution of Micron’s high gross margin, High Bandwidth (NASDAQ:BAND) Memory (HBM) ramp-up.

The analysts are also looking forward to positive updates on Micron’s HBM ramp, which is expected to contribute to the company’s financial performance. The HBM technology is a higher gross margin product, which could enhance Micron’s profitability as its adoption increases. For deeper insights into Micron’s valuation and growth prospects, InvestingPro offers exclusive access to detailed financial analysis and 10+ additional ProTips, along with comprehensive research reports that transform complex Wall Street data into actionable intelligence.

In other recent news, Micron Technology is set to announce its second fiscal quarter earnings, with analysts from Stifel and Citi maintaining a Buy rating and price targets of $130 and $150, respectively. Stifel expects Micron to meet consensus estimates for the quarter ending in February, though it foresees a decline in gross margins for the third quarter due to soft memory pricing. Citi anticipates that while the upcoming earnings report will be satisfactory, guidance may fall short of expectations due to a less favorable consumer mix and underutilization charges related to NAND. Despite these challenges, both firms highlight positive trends such as improving NAND and DRAM pricing, particularly from China, and potential benefits from Micron’s High Bandwidth Memory ramp. TD Cowen also maintains a Buy rating with a $125 price target, noting cautious optimism about DRAM and NAND suppliers pushing for price increases. The firm holds its earnings per share estimate at $1.35 for the May quarter, below the street consensus of $1.55. Analysts from these firms suggest a brighter outlook for Micron later in the year, supported by favorable pricing dynamics and demand cycles. Additionally, Micron is expected to benefit from advancements in NAND wafer-to-wafer hybrid bonding technology, as it follows KIOXIA in adopting this method.

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