UBS Raises Micron Price Target to $535
UBS analyst Timothy Arcuri raised the price target on Micron Technology (NASDAQ: MU) to $535.00 (from $510.00) while maintaining a Buy rating.
“Despite sentiment around memory that has turned very negative post MU’s gross margin guidance, we continue to believe we are in the midst of a super-cycle that will likely defy traditional analytical norms for the stock.
Our latest round of industry checks point to continued strengthening in pricing for both DRAM and NAND – particularly now on HBM which should move margins there higher.
We hear about active negotiations and a strong willingness from hyperscalers and OEMs to enter Long Term Agreements (equivalent to what MU coined as Strategic Customer Agreements, or SCAs).
We believe these discussions involve volume commitments, pre-payments, and well-defined pricing bands. For example, higher volume/lower pricing (but still within band), with the main focus being DDR.
Simultaneously, it appears hyperscalers are attempting negotiations for longer contract terms on HBM – and our checks highlighting that MU/SK/Samsung intend to rebuild a premium for HBM pricing into C2027.
In NAND, not all suppliers appear equally incentivized to enter LTAs/SCAs, as some suppliers (SK Hynix/Samsung) may want to preserve a degree of flexibility across cleanrooms in terms of how much capacity they allocate to NAND.
Ultimately, growing evidence that memory companies are willingly trading some near-term upside for longer-term visibility – and by extension, more stable earnings, margins, and ROE across the cycle – strengthens our conviction of the durability of this upcycle.
This is further reinforced by the fact that shortages could persist into C2028 – especially in DRAM. Net, we forecast MU EPS of ~$135 in C2027 (Street ~$103) and ~$120 in C2028 (Street ~$98).
We also think by this time next year, MU’s TBV will be ~$180/share, with the company holding >$100B in cash (equivalent to ~25% of its current market cap).
Net, we raise our PT from $510 to $535 and maintain Buy.”
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