Goldman Sees 20% Upside to Micron Earnings, Wall Street Calls It an 'early Christmas Present'

Micron Technology and its shareholders received an early holiday gift, as per analysis from Wall Street analysts assessing the memory chipmaker's quarterly results released after Wednesday's closing bell. The financial performance exceeded expectations, prompting a 6% pre-market surge in the company's shares.

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Bank of America's Vivek Arya expressed optimism, asserting that the memory market is undergoing a crucial turning point leading into CY24. Arya anticipates Micron (MU) to achieve positive earnings per share (EPS) in the third and fourth quarters of fiscal year 2024 (FQ3/Q4). He acknowledged that the growth in the latter half of fiscal year 2024 is contingent on a sustained pricing rebound.

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However, Arya highlighted the combination of recoveries in key smartphone and PC cyclical markets, coupled with the long-term secular tailwinds of artificial intelligence (AI), as factors instilling increased confidence in Micron's trajectory.

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Citi analyst Christopher Danely echoed the positive sentiment, referring to Micron's performance as an "early Christmas present." He reiterated his buy rating, citing the company's guidance surpassing consensus expectations. Danely pointed to signs of normalization in dynamic random-access memory (DRAM) inventories and broader end markets, along with an uptick in gross margins.

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Goldman Sachs analyst Toshiya Hari joined the optimistic chorus, raising the price target to $97, indicative of a potential 23% upside. Hari emphasized Micron's positive outlook, portraying an improved balance between supply and demand. Additionally, the analyst noted that Micron's expanded presence in the high bandwidth memory (HBM) market is poised to enhance revenues, margins, and earnings well into 2024.

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JPMorgan's Harlan Sur concurred with the positive outlook, predicting that Micron's stock will continue to outperform through 2024. Sur highlighted the market's anticipation of improving revenue, margin, and earnings power leading into CY25. He specifically pointed to Micron's HBM3e memory chip product as a significant revenue driver in 2024.

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However, not all of Wall Street shares the same enthusiasm regarding Micron's quarterly performance. Morgan Stanley's Joseph Moore maintained an underweight rating on Micron's shares despite acknowledging that the lower realized price increases may enhance visibility for the company until May. Moore sees more promising opportunities in Western Digital, rated as overweight, indicating a preference for the latter over Micron. While this quarter's results alleviate concerns about Micron's recent earnings underperformance, Moore remains unconvinced that the company has returned to peak earnings as of CY25.