Micron shares soared 190%. Why does Morgan Stanley expect them to grow by another 33%?
Morgan Stanley reiterated its recommendation to buy shares of semiconductor manufacturer Micron with an "above market" rating (Overweight), believing that the company's profits may reach new, previously unattainable highs, CNBC writes.
The bank raised the target price of Micron shares from $220 to $325, which implies growth of the securities by another 33% from current levels, despite the fact that they have already added 191% since the beginning of the year. The bank's analyst Joseph Moore also called Micron one of the best investment ideas.
Micron shares were down 1.5% in trading on Nov. 13.
Why Morgan Stanley expects Micron's stock to rise
Moore pointed to the shortage of dynamic random access memory (DRAM) as a factor that is taking Micron stock into "uncharted territory" and helping push it to new highs in earnings. He clarified that his assessment is based less on Micron's valuation and more on the potential for significant upward revisions to the company's outlook in the short term, CNBC writes.
"Since we upgraded the company to Overweight just over a month ago, spot DRAM prices have tripled, and if you look historically, you'd probably have to go back to the cycles of the 1990s to find similar memory price movement. So while the situation most closely resembles 2018 in terms of scarcity (according to our buyer contacts), Micron entered that cycle with profits roughly at breakeven, while today's profits are already at record levels," Moore wrote.
In his view, Micron shares are not yet fully reflecting the growth they are capable of. "At a time when sentiment around AI suggests positive moves - but is still accompanied by some anxiety - we see room for further enthusiasm for the story, beyond the jump in profitability," the Morgan Stanley analyst wrote.
On a combined estimate, Moore expects prices to rise 15-20% in the first and second quarters. However, buyers who haven't locked in a price upfront could face much higher transactions - 50% or more above those contracts.
What are other analysts saying?
Earlier in November, Arete raised its target price on Micron Technology from $230 to $280 and maintained a Buy recommendation on the stock (Buy rating). Its target implies a growth potential of 14%. Wells Fargo maintained a Buy recommendation on the company's securities with an Overweight rating and raised its target price on them from $220 to $300. His estimate assumes that the stock will grow by 22%.
Out of 39 analysts who have Micron securities valuation, 33 advise to buy them. Five of them are neutral and one more advises to sell.
This article was AI-translated and verified by a human editor
