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Deutsche Bank began coverage of Micron Technology (NASDAQ:MU) with a Buy rating and a $150 price target.
Shares of Micron rose by about 1% premarket on Thursday.
The analysts said they are constructive on both the cyclical and secular setup facing Micron. On the secular side, they believe High Bandwidth Memory, or HBM, is an underrated driver of gen/gen AI processor performance improvements and believe growth in HBM bits and Average Selling Price, or ASPs, should drive DRAM revenue growth (about 75% of MU revenues) and profitability above historical levels.
The analysts believe Micron will be a particular beneficiary of this trend, with HBM revenues expected to rise to about 23% of sales by 2026 (from nearly 0% in 2023), and HBM gross margins, or GMs, well above corporate average.
On the cyclical side, the analysts see a path to continued bit growth and ASP expansion in non-HBM DRAM in the coming years, driven by higher DRAM content-per-device as well as healthy supply-demand dynamics.
In NAND (the remaining around 25% of Micron’s revenue) the analysts said they are less optimistic, as they see fewer content-per-application growth drivers than they do in DRAM and view the supply-demand environment as less favorable.
The analysts said that despite the year-to-date run for Micron’s shares (MU +45% vs. S&P +6%, Philadelphia Semiconductor Index (SOX) +13%), they view current levels as still offering attractive upside.