Shares of semiconductor producer Micron Technology (NASDAQ:MU) rose 1% to $70.58 on Monday, following an upgrade by Deutsche Bank (ETR:DBKGn) analyst Sidney Ho from Hold to Buy. The price target was also revised upwards, from $65 to $85, suggesting a potential 22% increase from the stock's closing price last Friday.
Previously, Ho had maintained a neutral stance on Micron due to an oversupply in the inventory and weak macro end-demand. However, he now sees a recovery from this downcycle, attributing it to aggressive production cuts by suppliers and an upsurge in demand strength, notably in AI servers.
Micron, renowned for its memory and storage solutions, had been contending with low prices for Dynamic Random-Access Memory (DRAM), a type of semiconductor memory extensively used in desktop computers and smartphones. Ho has noticed a recent increase in DRAM pricing and predicts that this trend is sustainable and likely to accelerate over the next two quarters.
During the Deutsche Bank Technology Conference held in August, Micron's Chief Financial Officer Mark Murphy confirmed that they were experiencing the lowest point of pricing. He was optimistic about pricing strengthening through the second half of the year, assuming supply discipline is upheld and volume continues to grow.
Based on these factors, Ho expects Micron to guide first-quarter revenue and earnings above current Wall Street estimates. He also anticipates commentary suggesting further improvement over the next few quarters. In addition, he predicts significant upward revisions to Wall Street estimates for the remainder of CY23 and CY24 after earnings announcements.
Micron is scheduled to announce its fiscal fourth-quarter earnings after market close on September 27. The company's stock has seen a substantial gain of 41% in 2023.
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