Micron Technology Inc. (NASDAQ: MU) share prices have been higher yearly by analysts. The analysts predicted end-market normalization and a return to growth, confirmed by the FQ1 results. Now, the analysts are upping their targets again, and the trend will likely continue over the next year.
Paraphrasing comments from analysts, Micron is in the earliest stages of a multi-year upcycle now amplified by AI. Because demand for AI is so tremendous and AI requires such a vast amount of memory, investors should expect the upcycle to be more vigorous and last longer than previous memory chip cycles.
Industry normalization drives results for Micron
Micron had a good quarter, with demand for DRAM and NAND memory chips growing compared to last year. The company reported $4.73 billion in consolidated revenue for a gain of 15.6% compared to last year. The strength was driven by a 21% year-over-year (YOY) increase in DRAM, up 24% sequentially and an 11.5% increase in NAND. Strength was seen in computers and mobile with embedded up sequentially and YOY and storage down.
Margin news is also good. The company continues to report GAAP and adjusted losses due to capex and deleveraging experienced in the prior year, but losses will end soon, and cash flow is improving. The company’s operating cash flow improved by nearly 6x sequentially and 50% YOY, with capex also up. The salient point is that the 95 cents in adjusted losses are diminishing, and profits should return by the end of the year.
Guidance is raised, AI is in the house
Micron raised its guidance for the year due to strength in computing and mobile, aided by demand for AI. The company sees increased demand for data center memory products to aid AI development and application, driving Q2 revenue to $5.3 billion or 44% compared to last year, and the forecast may be cautious.
Micron also forecasts sequential fundamental improvement in financial metrics as revenue leverage returns. The takeaway is that revenue outpaces the consensus at the low end of the expected range, and the projected loss is less than half of the consensus figure.
Because AI continues to show momentum and momentum should build in 2024, Micron will likely outperform in FQ2 and guide Q3 higher. Until then, executives forecasted a record TAM in F2025, suggesting a record year. The company is also expected to post more than $6 in profits in 2025, putting the forward P/E near 12x and deep value territory.
Analysts raise targets, lead market to new highs
The analysts have provided a tailwind for Micron stock all year, which continues to blow. Marketbeat.com is tracking 14 fresh updates immediately following the FQ1 release, and 13 include price target increases. The single outlier is a reiterated Outperform from Wedbush’s Dan Ives, with a consensus-beating $95 price target.
The consensus is $90 and implies a 7% upside after the post-release pop in pricing. The high target is $112, which will likely move higher soon. Regardless, the consensus figure is trending robustly higher and up 16% in December. Moving to the high end of the range would put the market well into all-time high territory, breaking above the dot.com bubble peak and setting the market up to continue higher.
Technical outlook: Micron melting up
The price action in Micron gapped up on the news to advance more than 7% at the open, setting a multi-year high. The move may result in a pullback before higher prices, but higher prices are expected. The weekly and monthly charts are solid and show a market with bulls advancing from critical support levels with ample room to run. Assuming the company builds on its momentum, new highs will occur early in the 2024 calendar year.
