Micron Technology Inc. (MU) investors are facing a tough week after the company’s stock recorded its steepest decline since 2020. The drop followed the memory giant’s latest quarterly update, which showed a solid first-quarter performance but a disappointing outlook for the fourth quarter.
In the November quarter, Micron’s revenue climbed 84% year-over-year to a record $8.71 billion, beating expectations. Data center revenue surged over 400% and accounted for more than 50% of total revenue for the first time. Gross margins improved by 300 basis points, resulting in adjusted earnings per share (EPS) of $1.79.
However, what really disappointed investors was Micron’s outlook for the February quarter. The company expects revenue between $7.7 and $8.1 billion, which is below analysts’ expectations. Analysts had predicted $8.99 billion for the same period.
Micron attributed the weak outlook to excess inventory and weak demand in consumer-facing markets such as PCs and smartphones. However, analysts like Harlan Sur from J.P. Morgan see silver linings amid the turbulence. Sur expects better supply/demand dynamics and improved inventory levels among PC and smartphone clients in the latter half of FY25.
Sur also notes that Micron’s blended DRAM pricing will continue to trend higher as the company drives strong data center mix, including HBM (High-Bandwidth Memory) and server DRAM. The company more than doubled its HBM revenue sequentially and raised its 2025 HBM market forecast by 25%, increasing it from $25 billion to over $30 billion.
Sur’s recommendation is to hang in there and look ahead to better days. Despite the near-term weakness, Sur expects a short-lived down-cycle in memory and believes market conditions will improve in the latter part of 2025 as leading-edge DRAM supply remains tight and strong AI server demand drives growth in HBM/DDR5.
With this optimistic outlook, Sur reaffirmed his Overweight (i.e. Buy) rating on Micron, albeit lowering his price target from $180 to $145. The new target offers a ~61% upside from current levels, making it an attractive option for investors looking for potential gains in the long run.
Source: https://www.tipranks.com/news/hang-in-there-says-j-p-morgan-about-micron-stock