Micron Technology
stock was dropping early Thursday. The memory-chip company’s margin outlook appears to have surprised the market but that shouldn’t put investors off betting on the stock, according to UBS.
Micron
(ticker: MU) shares were down 4.9% in premarket trading at $64.85 after its fourth-quarter earnings report on Wednesday. The stock was up 36% this year through to Wednesday’s close. Analysts turned positive on the demand and supply balance for memory chips.
UBS analyst Timothy Arcuri said Micron’s guidance was likely a little worse than the market expected after a number of bullish comments from management at conference appearances. He noted it was a surprise Micron wouldn’t commit to gross margins as early as the second quarter of its current fiscal year, pushing that milestone to the second half of the year.
However, he argued that the upturn looks to be under way and 2025 should be a record year for memory-industry revenue. He kept a Buy rating and $76 target price on the stock.
“We think the path of least resistance is clearly to the upside here as demand, pricing, and profitability are all turning,” Arcuri wrote.
Micron has been struggling with lower demand for DRAM –or dynamic random-access memory– and NAND chips in its core end markets of PCs, mobile phones, and data centers. Arcuri said Micron’s guidance indicates nearly all its revenue growth for the current quarter will come from DRAM sales.
“Customers are already placing strategic buys as they seem to see the “writing on the wall” as to where pricing could go by 2025,” Arcuri wrote.
Write to Adam Clark at [email protected]
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