Tailwinds Ahead for Micron: Analysts Gauge the Impact of DRAM Inventory, Samsung's Supply Cuts, and SSD Pricing Dynamics

Mizuho analyst Vijay Rakesh maintained Micron Technology Inc MU with a Buy and raised the price target from $72 to $82.

MU reports its Q4 earnings on September 27 after the close. The analyst expects revenue, gross margin, and EPS of $3.9 billion (10.6%) and ($1.19), which is in line with the consensus of $3.9 billion (10.0%) and ($1.18). 

Near-term inventory remains elevated at DC customers, though Mobile/PC inventory is mostly standard. Rakesh estimates DRAM contract pricing in the September quarter is down ~5%, with declines moderating into the December quarter at down 3% Q/Q. 

Also Read: AI Demand, Positive Chinese Market Boost Micron's Pricing Dynamics Ahead Of Earnings, Says Analyst

In NAND, the analyst estimates contract pricing for the September quarter to be flat and improve into the December quarter at up 0-5% Q/Q. 

For MU's November quarter, he estimates $4.5 billion, (1.0%) and ($0.78), above consensus of $4.2 billion, (0.8%) and ($0.99), with continued improvements in Mobile but also DC inventory normalization. 

Potential DRAM wafer supply and utilization cuts at Samsung could be a tailwind into 2H23 to DRAM/ NAND inventory and pricing. 

MU is positioned for strong HBM3e ramps in 2024 with share gains in Gen AI demand.

Piper Sandler analyst Harsh V. Kumar reiterated a Neutral rating and a price target of $70. At this time, the current setup for Micron is exciting.

Given the Micron revenue split of around 70% DRAM, he feels it may be prudent to stay on the sideline. 

Most of the cloud and enterprise customers' inventory will be absorbed as they exit the current calendar. 

Additionally, with the timely supply cuts initiated by Samsung and in the broader industry, Kumar expects pricing to start to work in favor of Micron starting next year.

Overall, tailwinds for 2024 remain intact, which could lead to a favorable setup for Micron despite his highly near-term cautious stance.

Micron should be able to beat the top line for the November quarter guidance slightly. For August, the analyst is roughly in line with consensus. 

Kumar also expects MU to mention stable pricing in most end markets, except cloud and enterprise, where stabilization would be expected early next year in 2024.

Moving to SSD, checks indicate a substantial improvement in pricing. Checks suggest that vendors have been able to pass on several slight upticks in pricing to customers without denting demand. 

The difference between the pricing dynamics for the DRAM and the SSD market stems from the excess inventory in DRAM, which is still a near-term headwind to price increases to some degree.

The analyst estimates Q4 revenue of $3.9 billion and EPS of $(1.19).

He projects November quarter revenue of $4.43 billion and EPS of $(0.90).

MU Price Action: Micron Technology shares are up 1.70% at $69.06 on the last check Friday.