Wall Street analysts often have direct access to key industry figures, which they leverage to gain valuable insights. This access also benefits investors, who can use these insights to better understand a company’s current position.
And recently, Mizuho’s Vijay Rakesh, a 5-star analyst rated in the top 4% of the Street’s stock pros, touched base with Micron’s (NASDAQ:MU) management team to get the scoop on what’s happening at the memory giant. His takeaway? “We continue to see a constructive DRAM-NAND outlook into 2025E for MU, with HBM ramping and conventional DRAM market seeing improving pricing tailwinds.”
However, due to weak demand in the PC-handset market, Rakesh has now lowered his November quarter topline/GM/EPS estimates to be inline with or “slightly better” than Micron’s expectations of flat bit growth and a quarter-over-quarter gross margin increase of about 200 basis points. As a result, Rakesh’s revised topline/EPS figures stand at $8.49 billion/$1.61, compared to the consensus of $8.54 billion/$1.69.
Meanwhile, Rakesh thinks Micron’s HBM yields have gotten better (estimating in the 55-60% range in July/August) and should continue to improve into the end of the calendar year. Another tailwind for HBM3e should come in the shape of strong orders for Nvidia’s H200 in 2H24 and GB200 in 1Q/2Q25E.
On the other hand, Rakesh goes on to add cautiously that “any potential switch in Samsung’s strategy from maintaining DRAM supply/profitability discipline to maintaining market share could be a headwind for DRAM pricing/profitability.”
Looking further ahead, Rakesh anticipates the HBM market will reach around $30 billion by 2026, reflecting a 107% compound annual growth rate (CAGR), with Micron a “key beneficiary.” The analyst sees Micron’s HBM revenues rising from approximately $167 million in 2023 to $2 billion in 2024 and $5 billion in 2025, with expanding gross margins. As all newly ramping AI accelerators use HBM3e, Rakesh expects that HBM3e will jump from claiming ~30% share of the HBM market in 2024 to 50-70% in 2025E.
All told, seeing Micron as “well positioned in the AI race with its growing HBM share,” Rakesh maintained an Outperform (i.e. Buy) rating on the shares, although his price target is lowered from $145 to $140. Nevertheless, there’s still upside of 46% from current levels. (To watch Rakesh’s track record, click here)
Micron also gets strong support from the rest of the analyst community. The stock claims a Strong Buy consensus rating, based on a mix of 25 Buys vs. 2 Holds. There are also plenty of gains projected here; going by the $167.30 average target, a year from now, shares will be changing hands for a 74% premium. (See Micron stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
