Shares of Micron technology rose in early trading Monday, extending the memory chip maker's bumper gains so far this year, following a key price target upgrade from a top Wall Street analyst.
Micron (IN ) has added around $60 billion in market value this year as investors see the group's high-bandwidth memory (HBM) chips playing a key role in increasing investment in ai.
HBM chips are designed to be integrated into larger ai semiconductors, including those made by Nvidia. (NVDA) to help improve system performance and reduce power consumption.
Micron has also said that growing demand for its legacy DRAM memory products is likely to continue over the next two years.
The group will report fiscal third-quarter results after the close of trading on Tuesday, with analysts expecting a bottom line of 51 cents a share on revenue of about $6.66 billion.
Citigroup analyst Christopher Danely, who raised his price target for Micron by $25 to $175 per share in a note published Monday, believes strong sales and improving profit margins will drive better-than-expected earnings.
Demand for high-bandwidth memory increases
That view echoes comments from CEO Sanjay Mehrotra, who told investors in late March that Micron is “on track to generate several hundred million dollars of revenue from HBM in fiscal 2024.”
Mehrotra added that HBM's revenue would “increase our DRAM and overall gross margins beginning in the fiscal third quarter.”
South Korea-based SK Hynix, a key Micron competitor, forecast annual demand growth for HBM of around 60% in the medium to long term and said its chips were out of stock throughout this year and most of of 2025.
Micron, which introduced new 12-layer HBM3E chips earlier this year, also allocated most of its legacy HBM semis for the next financial year.
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Danely, who has a buy rating on Micron shares, also maintains that Micron “should continue to trade at a premium to its historical range given the exposure to ai.”
Baird analyst Tristan Gerra is also bullish on Micron heading into Wednesday's earnings. He raised his price target from $22 to $172 in a note published Monday.
“We continue to see significant growth opportunities for Micron as DRAM prices remain strong,” Gerra and his team wrote.
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Gerra forecasts that HBM's part of Micron's operations will generate $3 per share in earnings next year, with $9 coming from the rest of the technology group's business.
“A 30x (price-earnings) multiple is justified on Micron's projected exposure to HBM starting next year…assuming HBM revenues are 20% of total DRAM by the end of calendar 2025, to a potential $3 in earnings per share in fiscal 2026,” Gerra said.
A risk for Micron: China's export restrictions
A factor that will also prove key to Micron's earnings in the coming months will be whether and how the Biden administration advances restrictions on the export of key artificial intelligence technologies to China.
Bloomberg reported earlier this month that officials were looking to tighten rules on selling full-gate architecture, or GAA, to China-based clients, with talks in the early stages to limit HBM sales.
More ai actions:
- Nvidia Has $4 Trillion Value in Sight as ai Boosts Chip Sales
- Adobe faces troubling FTC lawsuit for 'trapping' customers
- Apple plans a major change in future iPhones
GAA is similar to HBM in that it is designed to reduce power and improve performance, but it is a transistor design technology and not a memory technology.
Micron shares rose 2% in premarket trading to indicate an opening price of $142.29, a move that would extend the stock's gain in 2024 to around 67%.
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