Micron’s price target cut ahead of earnings, but Wedbush keeps bullish views

Wedbush has reduced Micron Technology’s (NASDAQ:MU) price target to $140 from $170 in light of its reduced forward EPS estimates, ahead of the company reporting its fourth quarter results later on Wednesday.

Analysts led by Matt Bryson reiterated their Outperform rating on the stock. However, the analysts reduced their forward estimates as they think it is a more difficult near-term market environment tied to reductions of memory inventory at PC and handset original equipment manufacturers, or OEMs.

The analysts believe CQ3 contract pricing was set relatively favorably for DRAM and NAND (types of memory technology) by the early August time frame, a result which slightly improved Wedbush’s fiscal fourth quarter DRAM pricing estimates.

However, over the last month, Wedbush’s outlook for CQ4 pricing has declined for both NAND and DRAM as the analysts believe — inventory reductions at client device OEMs and soft retail demand have moderated demand effectively resulting an oversupply environment; and some pockets of enterprise pricing have also seen more modest pressure, with large customers likely to seek a moderation in pricing when setting CQ4 contract.

In addition, the analysts said that in early August they had expected DRAM pricing could be up high-single-digit or even double digits in CQ4 with NAND pricing maybe lifting modestly, now they believe blended pricing for DRAM and NAND might be flattish to slightly down and down mid-single digit plus, respectively (with individual fabs results dependent upon mix).

Bryson and his team noted that due to this sharp shift to their pricing outlook, their numbers for both fiscal first quarter and fiscal year 2025 have come down meaningfully.

However, they said that client product inventories should normalize over the next few quarters.

With data center AI demand remaining strong, standard server demand (and mainly storage server demand still growing), content for PCs and handsets are likely to lift in part due to a growth in AI stock keeping units, or SKUs, and seemingly limited memory bit growth (beyond High Bandwidth Memory, or HBM), according to the analysts. The analysts still expect that 2025 to be a strong year for memory.

Wedbush’s model assumes pricing dynamics will start to turn more favorable for Micron again in the FQ3/CQ2 timeframe with a stronger end to the fiscal and calendar year than they had previously expected, the analysts noted.

The analysts still see room for significant earnings expansion and in turn a recovery for Micron’s stock and thus, they have retained their Outperform rating.

Micron Technology (MU) has a Strong Buy rating at Seeking Alpha’s Quant Rating system, which consistently beats the market. Meanwhile, the Seeking Alpha authors’ average rating is also positive, Buy, and so is the average Wall Street analysts’ rating, Buy.