Stocks of Micron Get a Boost Ahead of Earnings

Micron Technology Inc. shares have soared 66% this year, but as the company approaches its next earnings report, concerns loom about the potential impacts from an April earthquake in Taiwan and the lack of a positive preannouncement of results.

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However, Cantor Fitzgerald analyst C.J. Muse advises investors not to overthink these issues. In a weekend note, Muse raised his price target for Micron’s stock from $150 to $180, suggesting a 27% upside from current levels. He believes the company will continue to benefit from the artificial intelligence boom, which has driven demand for high-bandwidth memory products.

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Micron's new 8-high HBM3E product has been the first to be qualified by Nvidia for its H200 products, and potentially for the upcoming B100/GB200 products. This significant development marks a shift for Micron, which previously had limited exposure to the high-bandwidth memory market. Muse expects the company to provide updates on its progress with HBM during the earnings call, including details on additional platform qualifications at multiple customers.

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For the May quarter, Muse anticipates Micron will report revenue of $6.70 billion, slightly above the consensus estimate of $6.65 billion. He believes revenues could have been even higher if not for the disruption caused by the earthquake. Looking ahead to the August quarter, Muse forecasts revenue guidance of $7.71 billion, exceeding the $7.56 billion analysts expect according to FactSet.

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Investors should also monitor gross margins, as positive supply-demand dynamics could drive pricing benefits over the next few quarters. Muse notes that investors are keenly focused on when Micron will return to 40% gross margins, with some optimistic that this could happen as soon as August. Although Muse is not as confident about this rapid timeline, he believes the company is likely to achieve gross margins in the 50% to 55% range eventually, thanks to an extended memory cycle.

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Muse’s optimism about Micron’s prospects is rooted in the strong demand for memory products fueled by advancements in AI technology. This trend has significantly boosted the market for high-bandwidth memory, positioning Micron well to capitalize on these opportunities. The company’s ability to be the first to qualify its HBM3E product with Nvidia underscores its competitive edge in this growing market segment.

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Furthermore, Muse emphasizes that the memory cycle appears to be extending, which bodes well for Micron’s long-term profitability. The company’s strategic moves to enhance its product offerings and secure key qualifications with major customers like Nvidia highlight its potential for sustained growth and improved margins.

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While the earthquake in Taiwan posed a temporary challenge, Muse believes that Micron’s underlying strengths and strategic positioning will help it overcome these short-term obstacles. The anticipated revenue growth and potential for improved gross margins reflect the company’s resilience and capacity to thrive in a dynamic market environment.

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In summary, despite recent concerns, Micron Technology Inc. remains poised for continued success, driven by the AI revolution and its strategic advancements in high-bandwidth memory products. Cantor Fitzgerald analyst C.J. Muse’s increased price target reflects his confidence in the company’s ability to capitalize on these opportunities and achieve significant revenue and margin growth in the coming quarters. Investors should stay focused on the company’s long-term prospects and its potential to deliver substantial returns, even in the face of temporary disruptions.

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