These are good instances to be a Micron (NASDAQ:MU) investor. Shares are up by 65% because the flip of the yr because the inventory has been a beneficiary of the AI-fueled market rally.
With the corporate about to ship its fiscal third-quarter 2024 report right this moment after the shut, Rosenblatt’s Hans Mosesmann, whose profitable inventory predictions have landed him at third spot amongst the Road’s inventory execs, thinks the percentages are staked in favor of the reminiscence large.
“We anticipate Micron to ship a beat-and-raise as we enter one of many largest reminiscence cycles in historical past,” mentioned the 5-star analyst. “This progress is pushed by the rising demand for reminiscence in synthetic intelligence purposes (which scales immediately with reminiscence content material), a brand new ramp-up within the HBM (excessive bandwidth reminiscence) business that reduces provide obtainable for conventional DRAM, and ongoing self-discipline in reminiscence capital expenditures.” Mosesmann expects this “development will proceed into 2026/27.”
The section’s provide of HBM stays a “important issue” to observe, as there are difficulties in assembly demand, a state of affairs Mosesmann expects to persist in 2025. Producing HBM3e continues to be difficult, exacerbated by the continued speedy enhance in demand.
As for Micron particularly, Mosesmann’s tackle HBM extends past its influence on topline progress to incorporate its “broader implications” for DRAM bit provide. To supply every HBM DRAM wafer requires 2 to three instances extra wafers in comparison with customary DDR5 PC/Server DRAM, thereby meaningfully influencing the general provide.
“So,” the analyst goes on to say, “even when Micron had been to ship zero HBM subsequent fiscal yr (we at present have a single-digit contribution), there could be a major upside to our up 35% y/y gross sales progress simply on the ASP upside. In different phrases, allocating extra HBM to wafer DRAM results in decrease total bit provide and longer cycles, no matter yields.”
Numbers-wise, Mosesmann is asking for FQ3 income and adj. EPS of $6.60 billion/$0.44, respectively. Apparently, each are literally under consensus at $6.66 billion/$0.48 however according to Micron’s up to date information from March. As for the FQ4 outlook, the analyst’s gross sales and adj. EPS estimates land at a respective $7.25 billion/$0.71, additionally not as excessive because the Road’s forecast of $7.57 billion/$1.02.
All informed, forward of the print, Mosesmann charges MU shares a Purchase, backed by a Road-high value goal of $225, a determine factoring in one-year returns of 59.5%. (To observe Mosesmann’s observe document, click on right here)
Barring one fencesitter, all of Mosesmann’s colleagues are on the identical web page right here. Primarily based on 19 Buys vs. 1 Maintain, the analyst consensus charges the inventory a Sturdy Purchase. The forecast requires 12-month returns of ~11%, contemplating the typical goal clocks in at $156.37. (See Micron inventory forecast)
To search out good concepts for shares buying and selling at engaging valuations, go to TipRanks’ Finest Shares to Purchase, a device that unites all of TipRanks’ fairness insights.
Disclaimer: The opinions expressed on this article are solely these of the featured analyst. The content material is meant for use for informational functions solely. It is extremely essential to do your personal evaluation earlier than making any funding.