Micron Tech Has Strong Demand And Competitive Edge For 2024, Deutsche Bank Upgrades To Buy

Deutsche Bank has upgraded Micron Technology Inc MU from Neutral to Buy with a price target of $85 from $65, a ~20% potential upside from current levels. 

The previous neutral stance on Micron was based on concerns about excess inventory in the supply chain and weak overall demand. 

Deutsche Bank analyst writes that the worst of the downcycle is in the past. The change in outlook is primarily due to aggressive production cuts by all memory suppliers and pockets of strong demand, particularly in AI servers requiring HBM and DDR5 memory. 

DRAM prices have shown signs of improvement, surpassing DB's earlier predictions by at least one quarter, primarily driven by robust demand for AI servers. 

Supply chain assessments indicate that these price increases are sustainable and likely to gain momentum over the next two quarters due to limited supply growth.

Deutsche Bank anticipates Micron to provide commentary suggesting improvements in the subsequent quarters, and Street estimates for the remainder of calendar year 2023 and 2024 will experience significant upward revisions post-earnings.

Micron Technology is gaining increasing confidence in the competitiveness of its 1-beta DRAM technology. 

Management's strategic focus on catching up with competitors regarding technology development in recent years has paid off.

Moreover, recent announcements by Micron, including the introduction of 128GB DDR5 modules based on 1-beta 32Gb monolithic dies, 24GB/36GB HBM3 Gen 2 (HBM3e), and LP DRAM designed for data centers, position the company favorably for the surge in demand expected in CY24 due to AI server build-outs. 

Regarding HBM3e, Micron is well-positioned to be a secondary supplier for NVIDIA Corporation NVDA in the latter half of CY24, further solidifying its competitive position.

Price Action: MU shares are up 1.52% at $70.94 on the last check Monday.