'Better late than never': Morgan Stanley endorses Micron stock after 120% rally

Shares of semiconductor manufacturer Micron, which have risen in price by more than 120% since the beginning of the year, have not yet exhausted the growth potential, says Morgan Stanley analyst. He improved the rating of chipmaker's securities and advises to buy them despite the fact that now they are traded at the historical maximum. Morgan Stanley expects the company's profits to increase in the coming quarters due to the AI boom.

"Better late than never," - so Morgan Stanley analyst Joseph Moore titled his note with a recommendation to buy shares of Micron, writes MarketWatch. In it, Moore raised the company's rating from Equal weight (on par with the market) to Overweight (above the market), and raised the target price from $160 to $220. The new target implies that the company's market value will grow by about 17% more from the close of previous trades.

The release of the analyst's recommendation by Morgan Stanley coincided with a new record of Micron: during the trading on October 6, its shares soared almost 7%, for the first time exceeding $200. Since the beginning of the year, the market value of the memory manufacturer has grown by 123%.

Moore's optimism stems from the expectation of strong results for Micron over the next 6-12 months. "This is more of a short-term buy signal than a long-term reassessment of value," the analyst clarified in a note.

Among the key drivers of growth, he highlighted improving earnings forecasts and the long-term outlook related to artificial intelligence. "Micron is reaching new valuation horizons along with sector growth. We expect several consecutive quarters of double-digit price growth, which could lead to significant earnings growth and dispel doubts around the production of high-speed HBM memory for AI," Ma wrote(quoted by CNBC). He estimates Micron's earnings will exceed $15 per share as early as next year.

The analyst noted that Micron's technology base remains strong and the risks of losing its competitive position are "unlikely to materialize." "Previously, investors feared that Nvidia's tightened HBM4 memory speed requirements could put Micron at a disadvantage," the analyst said. - "We do expect the company to lag behind [competitor and Nvidia's main HBM memory supplier] Hynix by about one quarter in terms of shipments, but if Micron manages to retain market share and establish joint production of new HBM4E chips with TSMC, its position will not be significantly impacted.

Moore remained one of the few skeptics of Micron, MarketWatch data shows. In all, of the 40 analysts tracking the memory maker, 35 of them recommend buying its stock (Buy and Overweight estimates), only three recommend holding it in a portfolio (Hold) and two recommend selling it (Underweight and Sell). That said, Wall Street's current target price of $192.2 is already roughly in line with market quotes.

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