Micron Technology’s (MU) CFO Mark Murphy recently warned of “a few hundred basis points” sequential decline in gross margins for the third quarter of Fiscal 2025 (ending May 31). Following this news, MU stock declined 2.6%, reflecting investor concerns about the company’s profitability. However, two Top-rated analysts dismissed concerns about the weak Q3 margin outlook. They reiterated a Buy rating on Micron stock, citing confidence in its long-term prospects.
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It must be noted that Murphy reaffirmed the previously issued guidance for the fiscal second quarter. For Q2, Micron projects adjusted earnings in the range of $1.33 to $1.53 per share, with revenue expected to be between $7.7 billion and $8.1 billion.
Micron is a semiconductor company that provides memory and storage solutions.
Murphy Sees Margin Recovery after Challenging Q3
At the Wolfe Research Auto, Auto Tech, and Semiconductor conference held yesterday, Murphy attributed the lower margin to a shift towards lower-margin consumer segments and pricing pressures in the NAND memory market. Moreover, he noted that Q3 will mark the lowest point for margins.
Nevertheless, Murphy expects margins to improve in the second half of 2025, driven by higher data center demand and improvement in smartphone inventory levels. Also, he noted that lower supply in the NAND memory market could help stabilize prices and enhance profitability.
Top Analysts Optimistic about Micron’s Growth Potential
Following the margin update, two Top analysts, Christopher Danely from Citigroup (C) and Srini Pajjuri from Raymond James (RJF), reaffirmed their Buy ratings on MU stock. Further, Danely assigned a price target of $150 on the stock which implies a 63.6% upside potential from the current level, while Pajjuri’s price target of $120 implies a 30.9% upside.
A key reason for their optimism is the potential of AI-driven high bandwidth memory (HBM) solutions to drive future margin growth. Additionally, Danely anticipates a recovery in the DRAM market in the coming months to bolster Micron’s performance.
What Is the Price Target for MU?
Turning to Wall Street, MU stock has a Strong Buy consensus rating based on 21 Buys and two Holds assigned in the last three months. At $136.10, the average Micron stock price target implies a 48.45% upside potential. Shares of the company have gained 9% year-to-date.
