- Wednesday, October 16, 2024
Micron Technology's stock experienced a drop in early Thursday trading. The company's margin outlook has raised eyebrows among investors, but according to UBS, this should not deter them from considering the stock for investment.
Micron (ticker: MU) shares declined by 4.9% in premarket trading, reaching $64.85, following the release of its fourth-quarter earnings report on Wednesday. However, it is worth noting that the stock has witnessed a growth of 36% throughout this year until Wednesday's closing. Analysts have expressed optimism regarding the demand and supply balance for memory chips.
UBS analyst Timothy Arcuri believes that Micron's guidance may have fallen slightly short of market expectations, especially considering the bullish comments made by management during conference appearances. The fact that Micron did not commit to gross margins as early as the second quarter of its current fiscal year came as a surprise, as that milestone has now been pushed to the second half of the year.
Nevertheless, Arcuri asserts that there are indications of an upturn in progress and predicts that 2025 will be a record-breaking year for memory-industry revenue. Consequently, he maintains a Buy rating on the stock and sets a target price of $76.
"We believe that the current trajectory is poised for growth as demand, pricing, and profitability are all showing signs of improvement," Arcuri stated.
Micron has faced challenges due to decreased demand for DRAM and NAND chips in its core markets such as PCs, mobile phones, and data centers. Arcuri explains that Micron's guidance suggests that nearly all of its revenue growth for the current quarter will come from DRAM sales.
"Customers are already making strategic purchases, seemingly anticipating the potential pricing trends by 2025," adds Arcuri.
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