UBS Raises Micron Price Target to $510

UBS analyst Timothy Arcuri raised the price target on Micron Technology (NASDAQ: MU) to $510.00 (from $475.00) while maintaining a Buy rating.

“MU reported another very strong beat and raise, but the stock faded slightly aftermarket. On one hand, we are sympathetic to the view that the beat and raise “juice” has largely played out with gross margin now guided >80%.

Feeding into this, our north star here has always been that MU peaks ~9mos ahead of peak margins and to some degree, these new strategic customer agreements will become headwinds for margins as MU trades near-term revenue for longer-term visibility.

On the other hand, the first agreement MU is signing is 5 yrs in duration – much longer than we expected – and customers would only enter into such an agreement if they saw memory as strategically critical.

Investors typically reward stocks for durability and visibility, and this is finally the evidence of the sort of lasting structural change that will drive much higher margins and ROE across the cycle.”

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