Micron Technology (MU) was named a “Top Pick” by Morgan Stanley due in part to the rising prices for dynamic random access memory, or DRAM.
“Since we upgraded MU to OW a little over a month ago, DDR5 spot pricing has tripled and in a historic sense, to find this kind of move in DRAM pricing you’d likely to have to go back to the cycles of the 1990s,” said Morgan Stanley analysts, led by Joseph Moore, in a Thursday investor note.
The financial firm dramatically increased its price target on the stock to a Street high of $325 from $220 and reiterated its Overweight rating.
“So while in terms of the severity of shortage (according to our buyer contacts) it feels most reminiscent of 2018, MU began that cycle with earnings at about breakeven vs today where earnings are already at record levels,” Moore added. “We believe that’s going to move us firmly into uncharted territory from an earnings standpoint, and we think the stock has yet to fully price in the upside that’s coming.”
Morgan Stanley expects DRAM prices to be up 15% to 20% during the first and second quarters of 2026, with some transactions spiking as high as 50%.
“We think what’s holding investors back is the view that this strength in pricing won’t last,” Moores noted. “Which is usually the case in a typical DRAM cycle, but what’s happening today is a case of demand growth that’s dramatically higher than supply will be for some time. We heard from the semicap suppliers during earnings, and from Samsung (OTCPK:SSNLF)/Hynix as well, that DRAM capacity expansion is happening quickly with entire fab schedules accelerated.”
Micron’s share price has already increased by 190% since the beginning of the year.