Micron sees biggest gain in a year as Wall Street praises memory rebound, AI

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Micron Technology (NASDAQ:MU) shares rose 8.6% on Thursday, their biggest gain since March 2022, after the memory producer offered up first-quarter results and guidance that topped estimates, prompting Wall Street to note that the rebound in memory is real, aided by artificial intelligence.

J.P. Morgan analyst Harlan Sur, who has an overweight rating, boosted his price target to $105 from $90 and noted that high-bandwidth memory products should be a “meaningful revenue driver” in 2024, as AI projects need more memory.

“The team expects higher [fiscal 2024] capex to support its HBM3e production ramp, which will constrain supply growth in non-HBM products,” Sur wrote in a note. “Micron expects [calendar 2024] industry bit supply growth to be below demand growth for both DRAM and NAND and the team is well-positioned to capture memory content on the strong AI /accelerated compute server deployments with its HBM3e product launch, which should be a meaningful 2024 revenue driver.”

BMO Capital analyst Ambrish Srivastava maintained his outperform rating and $90 price target, but boosted his estimates after the results, pointing to the increase in demand, particularly for AI.

Srivastava noted that Micron’s (MU) exposure to the high-bandwith memory market, along with supply and demand balance are “far bigger positives” than any concerns about the data center.

Bank of America analyst Vivek Arya also was impressed by the AI tailwinds.

“[Micron is] gaining traction in AI servers, with the company in final qualifications stages to support Nvidia’s (NVDA) H200,” which Arya said should result in revenue in fiscal 2024 of “several hundred million dollars,” albeit weighted to the second-half of the year. He also noted Micron is targeting around 20% of the market, which would be in line with the overall market share it has for dynamic random access memory.

“We believe the memory market is at an inflection point heading into [2024], and expect MU to return positive EPS in FQ3/Q4,” Arya wrote. “Though 2HFY24 growth largely more dependent on sustained pricing rebound (typically difficult for industry participants to forecast in medium-term), the blend of key smartphone/PC cyclical markets rebounding combined with the multi-year secular tailwinds of AI (DRAM content growth in servers today, PC/smartphones in CY24 and beyond) create increased confidence.”

For the period ending November 30, Micron (MU) lost an adjusted $0.95 on revenues of $4.73B. Cash flow from operations during the period came in at $1.4B.

Boise, Idaho-based Micron (MU) expects second-quarter revenue to be between $5.1B and $5.5B, with the mid-point above the $4.99B estimate. On an adjusted basis, it expects to lose between $0.21 and $0.35 per share, well above the $0.62 per share estimate.

Micron (MU) offered up a positive outlook for 2024, noting it sees signs of recovery in the smartphone and PC markets. Spending for next year is expected to be “slightly higher” than in 2023, with capital expenditures between $7.5B and $8B.