Tuesday, Wolfe Research maintained its Outperform rating on Micron Technology (NASDAQ:MU) stock with a steadfast price target of $200.00.
The firm's stance is anchored in the expectation of Micron's earnings power, with a projection based on approximately 10 times the anticipated $20 earnings power. This valuation is consistent with Micron's historical average normalized multiple of around 11 times.
Micron Technology has forecasted that average selling prices (ASPs) will continue to ascend through the calendar year 2025. The company anticipates generating over $100 million in near-term revenue from its High Bandwidth (NASDAQ:BAND) Memory 3E (HBM3E) products.
Additionally, Micron has reaffirmed its goal to achieve its customary market share in the DRAM segment by the calendar year 2025 and expects a multi-billion dollar contribution in fiscal year 2025 as it begins to ramp up production of the 12hi HBM3E.
Wolfe Research suggests that the influence of HBM on DRAM pricing will extend beyond the direct impact of HBM revenue. The analysis indicates that the CapEx increase expected in fiscal year 2025 may raise concerns among investors.
However, it is noted that over half of the forecasted increase is allocated to infrastructure spending, which is not anticipated to contribute to bit production until fiscal year 2027 at the earliest. The remaining CapEx is said to be earmarked for technology migration and HBM development, rather than expanding bit capacity.
The report concludes with a reinforcement of the potential for Micron to achieve the $20 earnings power, underlining the investments and strategic decisions the company is making in its operations and product offerings. Wolfe Research's outlook reflects confidence in Micron's financial strategy and potential growth in the forthcoming years.
In other recent news, Micron Technology resumed its stock buyback program, indicating improved market conditions and confidence in the company's financial health. The semiconductor firm also reported a robust Q3 revenue of $6.81 billion, exceeding estimates.
Micron has made significant strides in technology, unveiling its PCIe Gen6 solid-state drive (SSD) technology and shipping its ninth-generation (G9) triple-level cell (TLC) NAND solid-state drives (SSDs), an industry first with a record transfer speed of 3.6 GB/s.
In collaboration with ASML (AS:ASML), Micron has ordered the "High NA" tool, a development that promises advancements in computer chip manufacturing.
However, potential challenges loom as the United States government considers imposing new restrictions that could limit China's ability to procure advanced artificial intelligence (AI) memory chips, potentially impacting companies like Micron.
These recent developments reflect Micron's ongoing commitment to innovation and fiscal management in the semiconductor industry. The company continues to navigate a competitive landscape, with analyst firms such as Citi, KeyBanc, Wells Fargo, and BofA Securities maintaining their buy ratings on Micron.
InvestingPro Insights
As Micron Technology (NASDAQ:MU) continues to navigate the semiconductor landscape, real-time data from InvestingPro offers additional context to Wolfe Research's optimistic outlook. With a market capitalization of $120.45 billion, Micron stands as a significant entity in the industry. Despite a challenging P/E ratio currently standing at -76.94, analysts spotlight the company's resilience with a notable 11.48% return over the last week and a robust 71.66% return over the past year, indicating strong investor confidence.
InvestingPro Tips suggest that Micron has raised its dividend for three consecutive years, reflecting a commitment to shareholder returns even as the company undergoes strategic investments. Furthermore, analysts predict the company will be profitable this year, reinforcing Wolfe Research's $20 earnings power projection. The company's liquid assets surpassing short-term obligations and a moderate level of debt provide a stable financial foundation for its ambitious growth targets.
For those looking to delve deeper into Micron's financial health and strategic positioning, InvestingPro features additional tips that can offer a more nuanced understanding of the company's prospects. With a total of 12 InvestingPro Tips available, investors can gain a comprehensive view of Micron's potential trajectory.
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