Micron Technology (MU) experienced a stock decline in early Thursday trading following the release of their fiscal first-quarter earnings report. While the report showcased solid quarterly performance, a subdued near-term outlook, driven by weakening consumer electronics demand, prompted price target adjustments from Wall Street analysts and investor concern.
Micron’s stock has fallen significantly since its mid-June peak, reflecting broader market anxieties about the impact of reduced consumer spending on the memory chip sector, particularly its DRAM division. Despite acknowledging this demand weakness in their earnings report, Micron anticipates the current oversupply in the market to correct by early next year.
A key driver of optimism for Micron lies in the robust growth of its high-bandwidth memory (HBM) chips, essential components in artificial intelligence (AI) technologies. This segment’s performance helped Micron surpass Wall Street’s revenue projections and deliver a better-than-expected earnings per share of $1.79. Notably, Micron’s advanced HBM chips, including the new HBM3E iteration, are integrated into Nvidia’s (NVDA) H200 processors and its latest Blackwell systems. This positions Micron as a leading player in the rapidly expanding HBM market.
Micron CEO Sanjay Mehrotra projects the total addressable market (TAM) for HBM chips to reach approximately $30 billion in the coming year and to exceed $100 billion by 2030. This forecast signifies the transformative potential of HBM for Micron, with Mehrotra highlighting its importance during a conference call: “Our TAM forecast for HBM in 2030 would be bigger than the size of the entire DRAM industry, including HBM, in calendar 2024.” He emphasized Micron’s “industry leadership in this important product category.”
Despite the promising long-term outlook for HBM, Micron’s current-quarter revenue forecast of around $7.9 billion (plus or minus $200 million) fell short of Wall Street expectations by at least $1 billion, leading to a sharp decline in after-hours trading.
Cantor Fitzgerald analyst C.J. Muse noted the negative market reaction, stating, “Following the post-Powell bloodbath at the close Wednesday, shares clearly appear to be heading lower, with AI leverage unlikely to offer support near term.” However, Muse maintained a positive long-term view, adding, “This said, we do view this as simply a pause led by the more cyclical areas of the business with the more secular AI levers still well in play. Thus, we reiterate our overweight rating and continue to expect shares to outperform in 2025.”
JP Morgan analyst Harlan Sur echoed the optimistic sentiment regarding Micron’s long-term prospects but reduced his price target to $145 per share following the latest update. This adjustment reflects the current market sentiment, balancing the near-term challenges with the significant long-term growth potential driven by Micron’s leadership in the AI-powered HBM market.
In conclusion, Micron’s recent earnings report presents a mixed picture: strong performance driven by AI-related demand contrasted by near-term market weakness. While the current outlook has led to stock declines and analyst adjustments, the long-term potential of Micron’s HBM technology in the burgeoning AI sector remains a compelling factor for investors. The company’s strategic positioning in this high-growth market suggests a promising future, despite navigating current cyclical challenges.
