On Thursday, Bernstein, a research firm, maintained its Outperform rating and $120.00 price target on Micron Technology (NASDAQ: NASDAQ:MU), following the company's mixed financial guidance and updates on its product outlook. The firm acknowledged that Micron's second fiscal quarter (FQ2) guidance fell short of expectations, primarily due to a temporary slowdown in enterprise solid-state drives (eSSD), though dynamic random-access memory (DRAM) demand remains relatively solid.
Micron's first fiscal quarter (FQ1) results were in line with expectations, but the company's revenue forecast for FQ2 indicated a 9% quarter-over-quarter decline, which was a more significant drop than anticipated. This was mainly attributed to a short-term moderation in eSSD sales. Despite this, the DRAM outlook was described as solid, although it is expected to bring gross margins down by 1 percentage point quarter-over-quarter.
The firm also highlighted Micron's progress with High Bandwidth (NASDAQ:BAND) Memory (HBM), noting that revenue from HBM more than doubled quarter-over-quarter in FQ1 and that the margins were significantly higher compared to standard DRAM. Micron has started supplying HBM to new customers and anticipates a high volume ramp-up of HBM4 beginning in calendar year 2026 (CY26).
The company has raised its total addressable market (TAM) estimate for CY25 from $25 billion to over $30 billion, with expectations for the HBM TAM to quadruple by CY28 and potentially reach $100 billion by CY30.
Micron's projections for a rebound in bit demand in the second half of the year were also noted, with the company guiding for mid-teen percentage (MT%) growth in CY25 DRAM bit demand, though it has lowered the growth forecast for NAND to low-teen percentage (LT%). In response to the current market conditions, Micron has reduced NAND production. The company anticipates that customer inventory levels will normalize and bit growth will recover in the second half of the fiscal year and into CY25.
The report also mentioned Micron's cautious approach to its exposure to DDR4 and the Chinese market. The company expects revenue from Chinese customers to constitute a mid-teen percentage of total revenue in FY25, a decrease from the previous 25%. Micron's capital expenditures (capex) for fiscal year 2024 (FY24) are projected to be $14 billion, with a significant portion allocated to HBM development.
Bernstein concluded that while the near-term outlook for NAND is weaker, the situation should improve following the supply adjustments. The firm suggests that the premarket drop of 15% in Micron's shares may have been an overreaction, given the more optimistic long-term prospects for HBM.
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