Micron Tech plunges after earnings, several Wall Street banks remain bullish
Micron Tech's artificial intelligence development in the HBM field has become a focus of Wall Street's attention. Despite Micron's performance exceeding expectations, the stock price has dropped by nearly 6%. However, several Wall Street major banks remain optimistic about Micron's HBM business prospects and continue to believe in its future growth potential. Analysts from Barclays and Fidelity Bank have given Micron a "hold" rating and set a target price. Other analysts are also impressed by Micron's strength in the field of artificial intelligence
Thanks to the HBM business, Micron Technology (MU.US) has become one of the biggest beneficiaries of the artificial intelligence spending boom. Zhītōng Finance previously reported that Micron stated during its earnings conference call that the value of its HBM opportunity is "billions of dollars", exceeding the expectations of some on Wall Street. The earnings released after the market closed on Wednesday showed that Micron's Q3 revenue surged by 82%, surpassing expectations, but the earnings outlook failed to impress the market; subsequently, its stock price fell by nearly 6% in pre-market trading on Thursday. Nevertheless, several Wall Street investment banks remain optimistic about the prospects of Micron's HBM business and see it as a driver for Micron Technology's future growth.
Earnings Review: As of May 30th, Micron's adjusted earnings per share were $0.62, with a year-on-year revenue growth of 82% to $6.81 billion. The operating cash flow for the period was $2.48 billion, lower than the expected $3.24 billion, with a gross margin of 28.1%. Analysts expected earnings per share of $0.53 and revenue of $6.67 billion. Looking ahead to the next quarter, Micron expects adjusted earnings per share to be between $1.00 and $1.16, with revenue expected to be $7.6 billion ± $200 million. The adjusted gross margin is expected to be between 33.5% and 35.5%, with the market expectation at 34.5%.
Barclays analyst Tom O'Malley has a "hold" rating on Micron with a target price of $145. Analysts at Wells Fargo also reiterated their "hold" rating on Micron with a target price of $190, noting that they continue to believe in the "favorable upcycle thesis", partly due to the growth of HBM3e, which should be a "multi-quarter upside driver".
Other analysts are also impressed by Micron's advantage in artificial intelligence, including Bank of America analyst Vivek Arya, who mentioned Micron's exposure to NVIDIA (NVDA.US) and NVIDIA's use of HBM3e technology.
Arya reiterated a "buy" rating on Micron with a target price of $170 in an investor report, stating, "Management emphasized that all production for fiscal years 24 and 25 has been sold out, with prices remaining stable, providing visibility for healthy sales and margin growth."
Arya mentioned that besides HBM, Micron also has opportunities in other areas, including high-capacity DDR5 and data center SSDs, "as demand for artificial intelligence/traditional servers is growing, and the growth of cutting-edge artificial intelligence (PCs/tablets/smartphones: annual sales totaling 1.5-2 billion units) adds another growth dimension of 4-8GB incremental DRAM capacity (+50% -100%)".
Arya noted that in addition to the NVIDIA-related positives, there are other highlights in Micron's performance, such as increased capital expenditures for wafer fab equipment from Applied Materials (AMAT.US) and Camtek (CAMT.US)