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Shares of Micron Technology rose in early trading Monday, extending the memory chip maker’s extraordinary year-to-date gains, following a major price target upgrade from a top Wall Street analyst.
Micron (in ) The company has added about $60 billion to its market value this year, as investors see the group’s high-bandwidth memory (HBM) chips playing a key role in increasing investment in artificial intelligence.
HBM chips are designed to be embedded in larger AI semiconductors, including those made by Nvidia (NVDA) to help boost system performance and reduce power consumption.
Micron also said that increased demand for legacy DRAM products is likely to continue over the next two years.
The group will report third-quarter financial results after the close of trading on Tuesday, with analysts looking for a low of 51 cents a share on revenue of about $6.66 billion.
Citigroup analyst Christopher Danley, who raised his price target on Micron by $25 to $175 per share in a note published Monday, sees strong sales and improved margins leading to better-than-expected earnings.
The demand for high-bandwidth memory is increasing
This view echoes comments from CEO Sanjay Mehrotra, who told investors in late March that Micron is “on track to generate hundreds of millions of dollars in revenue from HBM in fiscal 2024.”
Mehrotra added that HBM’s revenues will be “accretive to our DRAM and gross margins beginning in the fiscal third quarter.”
South Korea-based SK Hynix, a major competitor to Micron, expected annual demand for HBM to grow about 60% in the medium to long term, and said its chips were sold out throughout this year and most of 2025.
Micron, which unveiled its new 12-layer HBM3E chips earlier this year, has set aside most of its legacy HBM semis for the upcoming fiscal year.
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Danely, who holds a buy rating on Micron shares, also argues that Micron “should continue to trade at a premium to its historical range given its exposure to artificial intelligence.”
Baird analyst Tristan Gera is also optimistic about Micron heading into Wednesday’s earnings. He raised his price target from $22 to $172 in a note published Monday.
“We continue to see meaningful upside opportunities for Micron as the price of DRAM remains strong,” Gera and his team wrote.
Related: Analysts adjust price targets for Micron Technology stock ahead of earnings
Jera sees the HBM portion of Micron’s operations generating earnings of $3 per share next year, with $9 coming from the rest of the technology group’s businesses.
“A 30 times [price-to-earnings multiple] “Micron’s expected exposure to HBM exiting next year is warranted…assuming HBM revenue is 20% of total DRAM exiting calendar 2025, versus a potential $3 EPS in fiscal 2026,” Gera said.
Risk for Micron: Chinese export restrictions
One factor that will also prove key to Micron’s profits over the coming months is whether and how the Biden administration will strengthen export restrictions on key AI technologies to China.
Bloomberg reported earlier this month that officials are looking to tighten rules around the sale of comprehensive gateway architecture, or GAA, to customers based in China, with talks at an early stage about limiting HBM sales.
More AI stocks:
- Nvidia has a $4 trillion valuation on the horizon as AI sees chip sales boost
- Adobe is facing a troubling lawsuit from the Federal Trade Commission (FTC) for “trapping” customers
- Apple is planning to make big changes to 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 signal an opening bell price of $142.29, a move that would increase the stock’s 2024 gains to about 67%.
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