Micron's AI-Driven HBM Demand and Data Center Growth to Fuel Stock Upside, Analysts Say

Micron Technology, Inc MU stock continued its upward trajectory Thursday after reporting upbeat quarterly results after the market closed on Wednesday.

Micron reported fourth-quarter revenue of $7.75 billion, topping the analyst consensus estimate of $7.64 billion. The adjusted EPS of $1.18 beat the analyst consensus estimate of $1.13.

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Micron expects first-quarter revenue of $8.7 billion, plus or minus $200 million, and adjusted EPS of $1.74, plus or minus eight cents per share.

Morgan Stanley analyst Joseph Moore maintained Micron with an equal weight and raised the price target from $100 to $114.

Wedbush analyst Matt Bryson reiterated Micron with an Outperform and a $140 price target.

Piper Sandler analyst Harsh V. Kumar maintained Micron with an Overweight with a $150 price target.

Rosenblatt analyst Hans Mosesmann reiterated Micron with a Buy and a $250 price target.

Stifel analyst Brian Chin maintained Micron with a Buy and a $135 price target.

JP Morgan analyst Harlan Sur reiterated Micron’s Overweight rating and a price target of $180.

Morgan Stanley: Micron posted a strong quarter and outlook, particularly given lower recent expectations, Moore noted. He remained concerned that prices are rising in a slightly oversupplied market. However, as long as producers believe they can sell that product next year, he said it has yet to weigh on pricing.

The analyst noted that HBM could continue to deliver a sizeable gross margin premium at equilibrium (particularly given customers prepaying for supply). Interestingly, the upside in the quarter came from the area with the lowest expectations, NAND, as per the analyst. Moore projected first-quarter revenue of $8.70 billion and EPS of $1.76.

Wedbush: Micron delivered results that exceeded prior fourth-quarter guidance, Bryson noted. He flagged management guiding towards continued margin growth in the fiscal first and fourth quarters, favorable supply and demand dynamic through calendar 2025, and the HBM demand next year will lift to $25 billion.

Net, Bryson found no reason to shift his constructive view. Bryson projected first-quarter revenue of $8.72 billion and EPS of $1.74.

Piper Sandler: Micron reported a solid quarter, nicely beating street expectations for the reported quarter and the guide for the November quarter, Kumar noted. His core Micron thesis is playing out very well; near-term supply is capped as there are virtually no wafer fab equipment (WFE) supply increases while rising units across various industries and HBM size and demand are putting pressure on the industry and driving up prices, he said.

The analyst continues to expect pricing to increase for both DRAM and NAND. On HBM, capacity for 2024 and 2025 is sold out, and Micron is contracted into pricing and units for both years, Kumar said. He noted a multi-design cadence on HBM for Micron and expects the rising demand and limited supply to help his overall thesis.

The analyst does not expect meaningful WFE to come on until 2027. As such, he remains constructive on Micron. Kumar projected first-quarter revenue of $8.70 billion and EPS of $1.74.

Rosenblatt: Micron’s unambiguous beat and raise last night surprised even Mosesmann as uber Bulls of the Multi Organizations Access Control (MOAC) AI-driven cycle.

Near-term smartphone and PC inventory weakness was trumped by big data center strength, HBM mix, high-density DIMMS, and high-end SSDs, he said.

The analyst noted Micron as a top pick for 2024 into the biggest semiconductor and memory cycles ever. Mosesmann projected first-quarter revenue of $8.70 billion and EPS of $1.74.

Stifel: Micron reported solid quarterly print and surprisingly guided for sustained low double-digit revenue growth, Chin noted. This much better-than-feared outlook runs contrary to his and consensus estimate reductions ahead of earnings.

Ultimately, the analyst noted that strength in data center demand is more than offsetting near-term softness in the consumer-centric PC and phone markets. In particular, substantial growth for data center and enterprise products is a trend Micron expects to persist through next year.

In sync with Chin’s views, management expects a short-lived correction in consumer markets, with inventories normalizing in the third quarter. He added that the company’s HBM ramp is also tracking to plan and poised to be a meaningful contributor next year.

As per the analyst, Micron’s outlook and upbeat commentary should help soothe some concerns that the memory cycle is teetering. Chin noted that the supply remains well managed, with the setup for reinvigorated pricing and margin strength as a kicker next year intact. China projected first-quarter revenue of $8.70 billion and EPS of $1.77.

JP Morgan: Micron reported a better-than-expected quarterly print on more substantial pricing power and an expected flattish DRAM bit shipment profile, Sur noted. The analyst said that the first-quarter outlook reflects a better shipment profile driven by a recovery in traditional server, enterprise, and cloud demand overlaid with accelerating HBM, AI revenue contribution, and continued blended pricing increases.

Overall, Sur noted that the memory industry is in the early stages of the up-cycle. Out-year EPS estimates typically get revised by ~2x-3x, and memory stocks usually follow the positive EPS revision trajectory higher.

The analyst noted the stock should continue to outperform through 2024 and into 2025 as the market continues to discount, improving revenue, margin, and earnings power on top of substantial positive EPS revisions.

Given the strong upside from current levels, Sur would be buying the stock at current levels. Sur projected first-quarter revenue of $8.70 billion and EPS of $1.74.

Price Action: MU stock is up 15.70% at $110.79 at the last check on Thursday.

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Image via Micron