Micron Technology Faces Headwinds: Analysts Cut Price Targets Amid Memory Market Concerns

Citi cuts Micron stock price target, expects below-consensus Q4 results and guidance By Investing.com

On Tuesday, Citi updated its outlook on Micron Technology (NASDAQ:MU), reducing the stock's price target to $150 from the previous $175 while retaining a Buy rating. The adjustment comes as the firm anticipates Micron to unveil its fiscal fourth quarter 2024 results on September 25, after the market closes. "We expect the company to post results and guidance below Consensus driven by legacy DRAM weakness," said Citi. The analysis by Citi points to an accumulation of DRAM inventory within the PC and handset markets. However, the firm predicts that this buildup is likely to be resolved by the end of the year. Despite the short-term challenges, Citi's outlook for Micron remains positive, with expectations of revenue and gross margin improvements in the forthcoming quarters. In other recent news, Micron Technology has experienced several adjustments in its stock price targets, despite maintaining steady fundamentals. Analysts from Morgan Stanley (NYSE:MS) expressed difficulty in justifying Micron's current valuation, projecting earnings per share (EPS) of $3.7 for the year. Meanwhile, Raymond James reduced its price target to $125, citing slower near-term growth in non-HBM DRAM and NAND markets. Mizuho Securities also adjusted its price target to $140, forecasting significant growth in the High Bandwidth (NASDAQ:BAND) Memory (HBM) market due to advancements in artificial intelligence. Susquehanna maintained a Positive rating but reduced the price target to $175, considering Micron's recent update on their November quarter DRAM and NAND bit shipments. Amid these developments, Micron has resumed its stock buyback program and launched its PCIe Gen6 solid-state drive (SSD) technology and ninth-generation (G9) triple-level cell (TLC) NAND solid-state drives (SSDs). Furthermore, in collaboration with ASML (AS:ASML), Micron ordered the "High NA" tool, promising advancements in computer chip manufacturing. However, potential new restrictions by the United States government could limit China's ability to procure advanced artificial intelligence memory chips, which could impact Micron. In light of Citi's revised outlook for Micron Technology (NASDAQ:MU), a closer examination of real-time data and insights from InvestingPro can provide investors with a more nuanced understanding of the company's financial health and stock performance. According to InvestingPro, Micron has a market capitalization of $96.67 billion, indicating its significant presence in the semiconductor industry. Despite facing challenges, as reflected by a negative P/E ratio of -62.19, analysts remain optimistic about the company's sales growth in the current year. This optimism is further supported by Micron's consistent dividend increases over the past three years. InvestingPro data also reveals that Micron's revenue has grown by 17.6% over the last twelve months as of Q3 2024, showcasing the company's ability to expand its top-line figures. However, the gross profit margin stands at 11.42%, which points to the weak margin issues Citi mentioned. On the balance sheet front, Micron's liquid assets surpass its short-term obligations, providing a cushion for operational flexibility. Additionally, with a fair value estimate from analysts at $151, there's a potential upside compared to the recent close price of $87.18, though this should be tempered with the understanding that the stock has experienced a significant price decline over the last three months. For investors seeking a more comprehensive analysis, there are additional InvestingPro Tips available on the company's profile, which can provide deeper insights into Micron's performance and future prospects. These tips delve into the company's industry standing, profitability forecasts, and debt levels, among other critical financial metrics.

Micron sees price target cut, while Morgan Stanley turns 'Cautious' on Korean tech sector

Morgan Stanley has reduced the price target on Micron Technology's (NASDAQ:MU) stock, while highlighting the outlook for the memory industry, mainly of South Korea. Micron's shares slipped about 4% premarket on Monday. A team of analysts including Shawn Kim noted that while memory is still moving higher, the rate of change is approaching a peak as supply catches up to demand. Morgan Stanley's cycle indicator has shifted out of 'late-cycle' to 'peak-cycle' for the first time since 2021, and this phase-change has historically meant a challenging backdrop for forward returns. The analysts expect earnings growth expectations to peak and reverse in the coming quarters, with a near 30% price-to-book, or P/B, multiple contraction and a higher chance of investors resetting positions. The industry is benefitting from a higher return high-bandwidth memory, or HBM, Total addressable market, or TAM, but facing higher capital intensity (front-end DRAM, EUV) and a flattening cost curve in commodity memory. This has changed capital allocation decisions and return requirements, the analysts added. The analysts said they prefer NAND to DRAM (types of memory technology). They have double downgraded SK hynix -- which is one of the leading suppliers of HBM chips in the world, and also to tech giant Nvidia -- to Underweight from Overweight. They downgraded their industry view on South Korea Technology to Cautious, but noted that Samsung (OTCPK:SSNLF) remains a relative Overweight as they expect quality/value to outperform on the way down, as it has in the past. Micron Technology (MU): The firm lowered Micron's price target to $100 from $140. Kim and his team said they acknowledge that they have been slow to respond at times to changing investor beliefs on Micron valuation, previously upgrading the stock to Equal Weight at $130 as AI took over the narrative. However, now, with AI taking somewhat of a back seat to concerns in core Double Data Rate, or DDR, they see no reason why sentiment could not reverse again. The analysts added that as Micron's guidance implies, its HBM run rate will 4x-5x over the next several quarters, and if the analysts see about $5B of revenue in 2025, HBM alone would make up 12% of today's consensus revenue estimate. Using a 3/1 trade ratio as a guidepost, a 10% HBM contribution is presumably 1%-3% of bits and about 6% of wafers. With third parties estimating 1 beta will make up less than 50% of Micron wafers until the second half of 2025, HBM could be a meaningful portion of advanced product next year, the analysts noted. The analysts stated that it seems that the thesis the bulls were playing for $150 is just as likely now as it was six months ago, with a condition that the overall fundamental rate of change was much better then. The analysts said they have lowered their price target to $100, reflecting those concerns on the fundamental trajectory, and they continue to see Micron as expensive on through cycle Free cash flow, or FCF, generation and remain well below consensus for CY25 EPS. Micron Technology (MU) has a Strong Buy rating at Seeking Alpha's Quant Rating system, which consistently beats the market. Meanwhile, the Seeking Alpha authors' average rating is also Buy, and the average Wall Street analysts' rating is Strong Buy.

Micron stock drops 3% as Morgan Stanley says the memory market is oversupplied By Investing.com

Morgan Stanley equity analysts trimmed their price target on Micron (NASDAQ:MU) shares while maintaining an Equal Weight rating on the memory chipmaker. The move comes as the Wall Street firm stands 30% below consensus on earnings per share (EPS) estimates for the fiscal 2025. While its outlook on the High-Bandwith Memory (HBM) sector remains positive, Morgan Stanley's team believes it does not address the fundamental issue of commodity oversupply in the market. Micron shares fell more than 3% in premarket trading Monday. Analysts have outlined five key points on the MU stock and the broader high bandwidth memory (HBM) market in their note. 1) HBM is expected to generate significant profits for Micron, aligning with market expectations. Micron's HBM3e product has improved after initial issues, and although margins may decrease with more suppliers entering the market, strong demand from AI companies ensures solid profitability. 2) Meanwhile, the oversupply situation in HBM is complex. Although there is excess capacity, it's manageable by shifting production to DDR5 or adjusting equipment. While oversupply exists, it hasn't affected profitability much due to customer prepayments and transitioning to newer technologies like HBM3e. "But our view that this is a solid profit pool is not that HBM is a commodity in short supply, it is that it is more of a design win business that will carry a meaningful premium to standard DRAM," analysts added. 3) Analysts disagree with the consensus that HBM production will limit supply growth for other markets like PCs and smartphones. They argue that the shift to HBM will not solve oversupply issues in other DRAM markets, maintaining a cautious stance on the broader memory market. 4) For the second half of 2024, volume remains weak, but prices are holding up due to supply control measures. While price increases may slow in Q4, Micron's pricing strategy remains resilient amid weak demand. 5) The Equal-weight rating for Micron stock stems from high valuation concerns, Morgan Stanley explains. Despite improving fundamentals, analysts are skeptical about the high stock price. Although earnings could positively surprise, the stock's valuation remains a key concern.

Why Micron Stock Dropped 4% Today | The Motley Fool

Up until today, Morgan Stanley had been saying Micron stock was worth $140 a share. Now, the banker believes Micron may be worth as little as $100. What changed? In today's note, Morgan Stanley analysts explained that their view of Micron has two main parts: high bandwidth memory chips (HBM) and everything else. Within the HBM market for chips facilitating artificial intelligence functions, everything is still hunky dory. "HBM is expected to generate significant profits for Micron," assures Morgan Stanley, and "strong demand from AI companies ensures solid profitability" even if profit margins erode as more competitors enter the market. On the other hand, the analyst takes "a cautious stance on the broader memory market," warning that DRAM semiconductor chips are in oversupply. And even if semiconductor stocks shift production away from DRAM to produce more HBM chips, this won't curtail ordinary DRAM production sufficiently to fix the oversupply problem there -- so profit margins will be weak everywhere but in HBM. On top of all this, Morgan Stanley says it has "valuation concerns" about Micron stock, worrying the shares are too expensive. It's not easy to tell if the analyst is right about this, however. Although expected to end this year with a profit, Micron is currently unprofitable -- and burning cash -- which makes it hard to hang an accurate valuation on the stock. What I can say is that if analysts are right about Micron being profitable in 2024, but earning a profit of only $0.71 per share, well, that's not a lot of profit to justify an $87-plus price tag on Micron stock. Micron's valuation does look better based on consensus forecasts for 2025 profit -- $8.38 per share, yielding a forward P/E ratio of 10.5. But if you buy the stock based on that forecast, you'd better hope Morgan Stanley is wrong about Micron.