On Thursday, KeyBanc maintained an Overweight rating on shares of Micron Technology (NASDAQ:MU) with a steady price target of $135.00, despite the company's F2Q guidance falling short of expectations. According to InvestingPro data, Micron, currently trading at $103.90, appears slightly undervalued based on its Fair Value assessment.
The firm's analyst pointed to Micron's F1Q performance, which aligned with forecasts, bolstered by a 20% quarter-over-quarter increase in data center growth and DRAM revenue, as well as a doubling of High Bandwidth (NASDAQ:BAND) Memory (HBM) revenues. The company's strong execution is reflected in its impressive 61.59% year-over-year revenue growth, with total revenue reaching $25.11 billion in the last twelve months.
The less optimistic F2Q outlook was linked to several factors, including a temporary drop in demand for data center Solid State Drives (SSDs), slower-than-anticipated inventory turnover in the consumer sector, specifically in PCs and smartphones, and an excess supply of NAND memory in the industry.
Despite the subdued F2Q forecast, KeyBanc expressed optimism about Micron's advancements, particularly in the development and upscaling of HBM3e technology. The firm also highlighted long-term industry tailwinds that could benefit Micron, such as increased content growth and developments in artificial intelligence.
InvestingPro analysis reveals multiple positive indicators, including expected net income growth and sales expansion for the current year. Subscribers can access 12 additional exclusive ProTips and comprehensive valuation metrics for deeper insights.
KeyBanc's stance on Micron remains positive, with expectations of the company navigating through current headwinds. The firm's analyst reaffirmed confidence in Micron's strategic progress and the potential for future industry growth to support the company's performance.
With a market capitalization of $115.2 billion and a solid financial health score from InvestingPro, Micron maintains its position as a prominent player in the semiconductor industry.
In other recent news, Micron Technology has experienced several financial adjustments following its recent earnings report and guidance. Needham held its Buy rating for Micron, but reduced the stock's price target to $120, citing a modest earnings beat and softer demand in consumer markets and data center solid-state drives (SSDs).
Other firms including JPMorgan (NYSE:JPM), Wolfe Research, and Stifel also adjusted their price targets for Micron to $145, $175, and $130 respectively, maintaining positive ratings despite the company's second fiscal quarter guidance falling short of expectations.
Analysts at these firms highlighted Micron's robust DRAM bit shipments and significant improvement in DRAM pricing, which compensated for weaker NAND bit shipments and pricing. Micron's High Bandwidth Memory (HBM) revenue more than doubled quarter over quarter, leading to an increase in the Total (EPA:TTEF) Addressable Market (TAM) estimate for HBM to over $30 billion by 2025.
In response to current market conditions, Micron has decided to reduce its capital expenditures for NAND production, expecting an impact on gross margins in the second and third fiscal quarters due to challenges in the NAND sector.
Despite these headwinds, the company's data center DRAM segments are projected to remain robust. These recent developments reflect a mixed but generally optimistic outlook for Micron's future, with a strong emphasis on the growth potential of HBM and the stability of server DRAM.
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