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On Thursday, Micron Technology Inc. stock (NASDAQ:) received an upgrade from a Hold to a Buy rating by Argus, with a new price target set at $140. The upgrade follows Micron’s impressive fiscal second-quarter 2024 performance, where the company’s revenue exceeded the high end of its guidance range.
The after-market reaction on Wednesday saw the company’s stock surge as it reported significant non-GAAP profits, defying management’s loss guidance and consensus loss expectations.
The company’s fiscal 2Q24 revenue saw a 58% year-over-year increase, signaling a strong recovery from the previous year’s low. Sequentially, revenue also climbed by 23% from fiscal 1Q24. Micron’s improved financial outlook is attributed to volume leverage, which has facilitated margin recovery and expansion.
For the upcoming fiscal third quarter of 2024, Micron’s management has projected revenues of $6.6 billion, surpassing the pre-report consensus estimate of $6.0 billion, and a midpoint non-GAAP earnings per share (EPS) of $0.45, which is more than double the consensus estimate of $0.20.
The positive guidance reflects growing demand in consumer markets and a rebound in enterprise markets. A surge in interest for artificial intelligence (AI) is boosting the need for high bandwidth memory (HBM) in data centers.
The normalization of inventories in consumer-device end markets is nearly complete and is expected to finalize in data center and enterprise IT markets in the upcoming months. This normalization, coupled with reduced supply and heightened demand from AI and cloud data centers, is leading to rising prices for NAND and DRAM memory.
Micron’s intact technology roadmap for both NAND and DRAM, along with a favorable industry supply-demand balance and the ongoing AI surge, are contributing to higher memory prices, aligning with a broad-based demand recovery. After a decline of over 45% in 2022, Micron’s shares have shown a robust recovery in 2023 and continue to perform well in fiscal 2024.
Investors are cautioned about the inherent risks associated with investing in memory technology stocks, which are known for their volatile pricing and potential for significant stock fluctuations. Despite these risks, Argus maintains a long-term Buy rating on Micron with a 12-month target price of $140.
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