$1,550: Needham raises price target on Micron ahead of Wednesday earnings

Needham hikes Micron price target by 200%.
Micron is set to release fiscal Q3 earnings after the close on Wednesday.
Needham expects Micron's longer-term supply agreements to lead to higher multiples.

Clay Webster FXStreet

Needham & Company raised its price target on Micron (MU) stock before Monday's open. In a sign of just how far its share price has appreciated in the past year, the price target was hiked all the way from $500 to $1,550.

The news sent Micron shares rising more than 5% in Monday's premarket to just under $1,200.

Micron had already rallied more than 8% last Thursday as investors prepare for what is expected to be a blowout earnings quarter on Wednesday.

Micron earnings news

Micron has been on a tear over the past year as demand for high-bandwidth memory (HBM) and dynamic random access memory (DRAM) semiconductor products has exploded among AI data center developers.

“We believe the memory market has continued to strengthen over the past 90 days and see market fundamentals remaining stronger for longer as a result of continued strong demand, a robust pricing environment, and limited capacity additions,” Needham analyst N. Quinn Bolton wrote in a note to clients. “Adding to these favorable conditions, we believe the long-term agreements being signed in the industry are providing suppliers, including Micron, with better demand visibility that extends over multiple years."

Bolton was simply echoing what many retail investors have been arguing for some time. That is, the heavily cyclical nature of memory chip makers is going through a transition. In order to ensure access to a supply-constrained product line, many of the largest memory buyers are inking long-term supply deals that will keep prices fairly high for the foreseeable future.

"Reflecting this multi-year visibility, together with the strategic importance of memory in AI, we believe investors should be comfortable paying a higher valuation multiple for memory stocks," Bolton wrote.

On Wednesday, after the regular market closes, Micron is expected to release its fiscal third-quarter results for the quarter ending in May. The Wall Street consensus has Micron earning an adjusted $20.21 per share on $35.15 billion in revenue.

Author

Clay Webster

FXStreet

Clay Webster grew up in the US outside Buffalo, New York and Lancaster, Pennsylvania. He began investing after college following the 2008 financial crisis.

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