On Thursday, JPMorgan maintained its Overweight rating on Micron Technology (NASDAQ:MU) and increased its price target to $180 from $130. The firm's analyst cited Micron's better-than-expected results for the May quarter, including revenue, gross margins, and earnings per share, along with a stronger earnings outlook for the August quarter. The positive adjustments reflect Micron's successful high-bandwidth memory (HBM) ramp-up and ongoing increases in DRAM and NAND pricing.
Micron's financial performance is buoyed by demand for AI servers, which is driving growth for HBM/DDR5 and enterprise SSDs in a tight supply environment. The company's HBM3e product, which is already sold out through 2025, is incorporated into NVIDIA's H200/GH200 GPUs, with progress on additional platform qualifications. Micron is also on track to significantly increase its HBM revenues in fiscal year 2025.
The company has raised its capital expenditure forecast for fiscal year 2024 to $8 billion, which aligns with previous statements at the JPMorgan Technology Conference. The planned investment includes greenfield fabs in Idaho and New York, which are not expected to contribute to Micron's supply profile until 2027. This strategic expansion is anticipated to ease concerns about aggressive capacity increases in the near term.
JPMorgan's outlook for the memory industry is optimistic, highlighting that the sector is in the early stages of a cyclical up-cycle that usually lasts 6-8 quarters. During such cycles, earnings per share estimates tend to be revised upwards significantly, and memory stocks generally trend higher in response to these revisions.
The firm believes that Micron's stock will continue to outperform through 2024 and into 2025 as the market recognizes its growing revenue, margins, and earnings potential. JPMorgan has updated its calendar year 2024 estimates, initiated its 2025 estimates, and set a December 2025 price target of $180 for Micron, reaffirming the stock as one of its top semiconductor picks for the next year.
In other recent news, Micron Technology Inc (NASDAQ:MU) has recently outperformed revenue estimates for its third quarter, reporting a revenue of $6.81 billion, driven by increased demand for memory chips from the AI industry. The company anticipates receiving $6.1 billion in grants from the U.S. CHIPS Act, which aims to strengthen the domestic semiconductor industry.
Baird has reaffirmed its Outperform rating on Micron, highlighting the company's increased capital expenditures, particularly for the development of High Bandwidth (NASDAQ:BAND) Memory (HBM), expected to meet the surging AI demand. However, Aletheia Capital downgraded Micron's stock from Buy to Hold due to concerns over Micron's High Bandwidth Memory 3E (HBM3E).
In other developments, Entegris (NASDAQ:ENTG), a supplier for the chip manufacturing industry, secured a preliminary agreement for a grant of up to $75 million from the Biden administration to develop a new facility in Colorado Springs. This grant is part of the Chips and Science Act initiative, aimed at increasing domestic chip production and reducing reliance on foreign plants.
Tech stocks have experienced a resurgence, with companies like Nvidia (NASDAQ:NVDA), Broadcom (NASDAQ:AVGO), Taiwan Semiconductor Manufacturing, and Arm Holdings (NASDAQ:ARM) experiencing an increase in their stock value. Micron Technology's shares also rose as the market anticipates its quarterly earnings report.
InvestingPro Insights
As Micron Technology (NASDAQ:MU) captures the spotlight with its optimistic outlook and strategic expansions, real-time data and insights from InvestingPro further illuminate the company's financial landscape. With a robust market capitalization of $156.27 billion, Micron stands as a formidable force in the semiconductor industry. Despite facing a challenging period with revenue declining by 20.6% over the last twelve months as of Q2 2024, the company has demonstrated a remarkable resilience, reflected in a significant six-month price total return of 64.65% and a staggering one-year price total return of 114.4%. This performance is a testament to Micron's ability to navigate market fluctuations and maintain investor confidence.
InvestingPro Tips highlight Micron's three-year streak of raising dividends, suggesting a commitment to shareholder value amidst financial headwinds. Additionally, analysts have revised their earnings upwards for the upcoming period, indicating a potential turnaround that may bolster Micron's profitability. This aligns with JPMorgan's positive stance, as they foresee a cyclical up-cycle for the memory industry that could further propel Micron's financial metrics.
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