Analysts revise price targets for Micron shares after earnings slump

Micron Technology shares fell in early trading Thursday following a rare double downgrade of the AI ​​memory chip maker, which continues to suffer from its long summer slump.

micron (MU) which has underperformed its chip rivals and the wider technology sector this year, is looking to capitalise on the surge in investment in artificial intelligence by using its high-bandwidth memory chips.

The company reported solid third-quarter results in June and announced a 90 percent increase in sales for the current quarter compared to the same period last year, to around $7.6 billion.
The numbers partly reflect demand for the new HBM3E chips now being used in Nvidia’s (NVDA) H200 processors and its newly developed Blackwell systems.

Micron also told investors it expects to generate “multiple billions of dollars in HBM revenue” in fiscal 2025, which ends in August next year. The company added that its share of the emerging market will “equal our total DRAM market share” sometime next year.

However, the stock price has fallen more than 40% since that late June update, partly due to concerns about the high valuations of AI-related chip stocks and the huge capital spending required to meet production and demand forecasts.

Micron reports strong increase in capital expenditure

However, to enable such an increase in production, investments must be increased significantly. And Micron, which is forecasting investments of around $8 billion for the current fiscal year, expects this amount to rise to around “the mid-30 percent mark of sales” in fiscal 2025.

According to current forecasts, this would mean capital spending of $13.5 billion, an increase of almost 70% over fiscal year 2024 levels.

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Exane BNP Paribas analyst Karl Ackerman, who made a rare double downgrade of Micron stock and now rates it as “underperform,” expects the company’s lackluster performance to continue.

“While some investors are aware of the downside risk to near-term results, we believe Micron will underperform its artificial intelligence peers through 2025 due to an oversupply of high-bandwidth memory, leading to a faster-than-expected correction in conventional DRAM selling prices,” Ackerman said.

“Our earnings estimates for 2025 and 2026 are 34% and 45% below consensus, respectively,” he added.

Ackerman also lowered his price target on Micron stock by $73 to $67 per share.

Raymond James: Micron DRAM cycle “has legs”

Meanwhile, Raymond James analyst Srini Pajjuri also lowered his price target for Micron from $160 to $125 in a note published on Thursday, but maintained his “outperform” rating.

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The analyst was more optimistic about the group's short-term development, arguing that the weakness was priced into the share price and that the new DRAM cycle had “tradition”.

Other analysts say Micron's HBM developments and market share gains could give it greater pricing power for its older DRAM memory chips.

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Micron's DDR5 memory, released in 2020, also offers more performance with lower power consumption than its predecessors, while solid-state drives are used in flash storage in laptops and desktop computers.

“We are in the early stages of a multi-faceted race to develop artificial general intelligence (AGI) that will revolutionize all aspects of life,” CEO Sanjay Mehrotra told investors in June.

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“AI will also penetrate to the periphery via AI PCs and AI smartphones, as well as smart cars and smart industrial systems,” he added.

“These trends will drive significant growth in demand for DRAM and NAND, and we believe Micron will be one of the semiconductor industry's biggest beneficiaries of the multi-year growth opportunity presented by AI.”

Micron shares closed 3.4% lower in premarket trading, opening at $87.60 each.

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