Why Micron's stock is cruising toward its best day in 12 years

By Emily Bary

Micron 'certainly delivered the goods' with its earnings and outlook in the face of high expectations

The memory-chip market is known for being cyclical, but Wall Street seems especially excited about Micron Technology Inc.'s ability to ride the current uptrend.

Shares of Micron (MU) were up 14.6% in morning trading Thursday, following the company's results, which beat consensus expectations. The company said Wednesday it is benefiting from better pricing and supply/demand dynamics, thanks in part to momentum in artificial-intelligence servers.

See more: Micron's stock rockets higher as company delivers big, AI-fueled earnings beat

Micron's stock is on track for its highest percentage gain since Dec. 22, 2011 - when it rose 15.7% - if current prices carry through to the close.

The company is a maker of high-bandwidth-memory (HBM) products, which are proving crucial in the era of AI computing. "HBM is arguably the strongest secular driver the industry has ever seen," Raymond James analyst Srini Pajjuri wrote of the memory market.

He kept his outperform rating on Micron shares and boosted his price target to $130 from $100 in his latest note.

Cantor Fitzgerald's C.J. Muse was similarly upbeat.

"Expectations were high, but Micron certainly delivered the goods," he wrote." Micron's outlook for the May quarter is better than expected "any way you slice it, particularly when a more normalized tax rate would suggest an annualized earnings run-rate approaching $2.00+ this early in the cycle (far better than any buy-side whisper we heard coming in)."

Further, the company expects tight supply of both DRAM and NAND throughout this calendar year, which could help the company achieve a $7 to $8 run rate of annualized earnings per share by the time 2024 is up.

He reiterated his overweight rating, while lifting his price target to $135 - above the $120 level he raised it to just this past weekend.

Opinion: Micron blows away Wall Street estimates, but a specter potentially looms

Piper Sandler's Harsh Kumar called the latest results and outlook "stellar," as Micron expects favorable trends to continue during 2025 as well.

"In a nutshell, tight supply, increasing demand, normalization of excess inventory coupled with the increased size of HBM die is driving dramatic improvements in pricing," he wrote. "We don't see any easy solutions to adding supply as this process typically takes multiple quarters if not years."

The company portends to be a "direct beneficiary" of what's expected to be multi-quarter strength in both the traditional memory and HBM markets.

He upped his price target to $130 from $95, and kept his overweight rating.

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JPMorgan's Harlan Sur suggested that the party isn't over yet for Micron shares. "We believe the stock should continue to outperform through 2024 as the market continues to discount improving revenue/margin/earnings power" into calendar 2025, he wrote.

Sur noted that Micron's HBM3e product is sold out already for this calendar year, with most of 2025 supply also already having been assigned.

He rates Micron shares at overweight, with a fresh target of $130, up from $105.

Shares of fellow memory player Western Digital Corp. (WDC) were ahead about 6%.

-Emily Bary

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03-21-24 1011ET

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