By Angela Palumbo
Micron Technology reports earnings next week and while many analysts are pessimistic about what guidance the chip maker will provide, a Citi analyst still said buy the stock.
Citi analyst Christopher Danely wrote in a research note Friday that he spent time chatting with investors this week about their expectations for Micron’s earnings, which will be released after the stock market closes on Sept. 25. His takeaway: a lot of pessimism.
“We estimate roughly 80% of investors are bearish on Micron with every hedge fund we spoke with being negative but a few mutual funds being positive,” Danely wrote.
While shares of Micron have risen 4.7% this year, they have recently taken a tumble. As of Thursday’s close, the stock has dropped 42% from its all-time closing high of $153.45 hit on June 18. There’s a few reasons for the shift in sentiment. For one, broader semiconductor stocks have taken a hit in recent weeks as investors rotate their money away from tech, competition heats up, and geopolitical concerns increase.
The PHLX Semiconductor Index has dropped 14% from its 2024 closing high of 5,904.54 set on July 10, 2024.
Several analysts also have come out with more pessimistic commentary regarding Micron this month. BNP Paribas analyst Karl Ackerman double downgraded shares to Underperform from Outperform and slashed his price target to $67 from $140. He expects Micron to underperform compared with fellow makers of artificial-intelligence semiconductors through 2025 because of an oversupply of high bandwidth memory, or HBMs, that would push down the average selling prices of the company’s memory chips.
Morgan Stanley analysts then lowered their price target on Micron to $100 from $140 while remaining Equal Weight. They questioned the growth of Micron’s average selling price in the fourth and first quarters, and expect the stock to “continue trading poorly unless that shows signs of reversing.”
Danely added in his Friday note that a lot of the investors he talked to expect the guidance Micron gives for its November quarter to be below consensus estimates — earnings of $1.58 a share on revenue of $8.35 billion, according to FactSet.
“The main ‘bear thesis’ we heard was negative DRAM [dynamic random- access memory] pricing in 4Q24, 1Q25, and 2Q25 with C25 EPS of $9.41 being cut in half due to lower demand from the PC/handset markets,” he wrote.
But Danely is still bullish. He rates Micron a Buy with a $150 price target. The stock is currently trading at 9.6 times 12 month forward earnings, which is significantly below its five year average of 21 times. That cheap valuation, along with the potential of increased demand for Micron’s products over time due to the company’s exposure to AI, are reasons to buy the stock, he said.
Shares of Micron were flat Friday t0 $89.36, while other semi stocks were down on Friday. Nvidia dipped 0.5%, Intel declined 1.9%, and Advanced Micro Devices was down 1.3%.