One of the advantages of being a Wall Street analyst involves getting the honey straight from the hive. Or less euphemistically, in the stock market’s case, gaining access to companies’ top brass and relevant information about their operations.
And recently, Bank of America’s Vivek Arya, a 5-star analyst rated in the top 1% of the Street’s stock pros, has been getting the lowdown on all things Micron (NASDAQ:MU), having held talks with some of the memory giant’s management team.
His key takeaway? The company is very optimistic about pricing, visibility, supply discipline, and the improvement of its product mix, particularly in AI computing and enterprise storage products.
Management reiterated their objective to increase their share of HBM (high bandwidth memory) to 20-25% within a CY25 TAM (total addressable market) potentially exceeding $20 billion, up from less than 10% share of an approximately $14 billion TAM in CY24. “Meanwhile,” Arya goes on to add, “edge AI – phones and PC – is just getting started and could become an incremental growth driver over the next few years.”
Given its industry-leading tech (30% performance advantage compared to peers on HBM) and strong balance sheet, the company sees itself as “perhaps best positioned versus historically.” Traditionally, the memory industry was commoditized, primarily driven by consumer products with short design cycles and minimal differences among suppliers. Increased investments would often lead to greater capacity yet also to rapidly falling prices. However, AI has transformed the industry, as HBM necessitates “significantly higher complexity,” requiring three times the trade ratio or three times the number of wafers needed to achieve the same bit output as conventional DRAM memory.
Micron also anticipates a steady improvement in gross margins, driven not only by pricing but also by a shift in product mix towards “higher value and margin accretive” items such as HBM, high-capacity DIMM (dual in-line memory module), LPDDR (low-power double data rate), and high-capacity enterprise SSDs (like the 6500 product with 30TB of memory). “In other words,” says Arya, “a very broad multi-cylinder exposure to AI across training, inference, cloud, enterprise and edge/consumer.”
All told, Arya came out of the meeting reiterating a Buy rating on Micron shares backed by a $170 price objective. Should the target be met, a 12-month gain of 28% could be in store. (To watch Arya’s track record, click here)
Most analysts agree with the Bank of America stance; based on a mix of 25 Buys vs. 2 Holds, the consensus view is that this stock is a Strong Buy. The $169.08 average target is practically the same as Arya’s objective. (See Micron stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
