Key Takeaways
- Citi boosted Micron’s price objective to $510 from $430, maintaining a Buy recommendation following exceptional quarterly results
- UBS similarly increased its target to $510 from $475 with a Buy rating, though noting that additional margin expansion may already be reflected in the share price
- The company delivered February quarter sales of $23.9B with earnings per share of $12.20, surpassing analyst projections by 21% and 36% respectively
- Forward guidance for the May quarter projected $33.5B in revenue and $19.15 in EPS, exceeding consensus estimates by 42% and 70%
- A new five-year supply agreement was announced, indicating robust long-term demand for memory solutions
Micron Technology (MU) experienced notable volatility this week. The memory chip manufacturer saw its shares decline approximately 4% during extended trading hours after releasing earnings results that substantially exceeded Wall Street’s projections.
The negative market reaction surprised many observers. Industry analysts identified two primary concerns weighing on investor sentiment: elevated capital spending forecasts for the 2027 fiscal year, and questions surrounding whether gross margins have reached their zenith. The company’s projected 81% gross margin figure actually surpasses Nvidia’s 75% margin.
Investors likely also took profits after the stock’s impressive run leading up to the earnings announcement. Shares had climbed 354% during the preceding twelve months.
By Friday’s opening bell, Micron showed minimal movement in pre-market activity.
Citi’s Atif Malik maintained his Buy recommendation while elevating his price objective to $510 from $430. His bullish stance centered on profitability metrics that exceeded forecasts.
Malik articulated the core investment thesis debate effectively. Market participants are evaluating whether MU can sustain upward momentum alongside rising DRAM pricing — similar to the Windows PC DRAM expansion during the 1990s — driven by robust artificial intelligence demand and constrained fabrication capacity additions. The alternative scenario involves price stabilization following the sharp first-quarter increase.
He suggested the stock could maintain current levels but noted potential near-term rotation toward semiconductor equipment manufacturers given the increased capital expenditure outlook.
UBS’s Timothy Arcuri also upgraded his price forecast, moving it to $510 from $475 while retaining a Buy rating. Though recognizing the impressive quarterly performance, his outlook was more tempered regarding future developments.
Profitability Outlook and Strategic Partnerships
UBS observed that with gross margins now projected above 80%, substantial additional upside from continued outperformance may already be incorporated into current valuations. Historical analysis suggests Micron shares typically reach peak levels approximately nine months before margins top out.
The firm also highlighted new strategic supply arrangements Micron established, which could present short-term margin pressures. These agreements exchange some immediate revenue optimization for extended supply certainty.
The initial contract spans five years — exceeding UBS’s expectations. According to the firm, customers would only commit to such extended agreements if they considered memory chips strategically essential. UBS believes markets typically reward companies for business model durability, and these partnerships demonstrate enduring structural transformation.
Impressive Financial Performance
The February quarter financial results were undeniably strong. Revenue reached $23.9 billion while earnings per share totaled $12.20, exceeding consensus forecasts by 21% and 36% respectively.
The May quarter outlook proved even more striking. Micron forecasted revenue of $33.5 billion with EPS of $19.15 — surpassing analyst expectations by 42% and 70%.
Numerous additional analysts elevated their price targets following the report. Cantor Fitzgerald increased its objective to $700, Rosenblatt moved to $600, Wolfe Research raised its target to $550, and BNP Paribas Exane highlighted Micron’s advantageous position for the multi-year AI data center expansion cycle.
Bernstein SocGen confirmed an Outperform rating, emphasizing increases in average selling prices. Pricing momentum for both Micron’s DRAM and NAND products emerged as a recurring theme throughout analyst commentary.
As of Friday’s session, MU traded at $443.52.
