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Morgan Stanley names Micron a top pick, cites memory shortage leading to new earnings highs
Published
6 months agoon
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Morgan Stanley believes that Micron ‘s earnings could move into new uncharted highs from here. The bank stood by its overweight rating on the semiconductor manufacturer and hiked its price target to $325 from $220. Analyst Joseph Moore also named Micron a top stock pick. Shares of Micron have surged 191% this year. Moore’s updated forecast implies that the stock could rally another 33% from here. MU YTD mountain MU YTD chart Moore pointed to a shortage in dynamic random-access memory, or DRAM, for leading the stock into “uncharted territory” and helping to boost it to new highs in earning power. He clarified that his call is less based on Micron’s valuation, and more given its potential for material upward revisions in the short term. “Since we upgraded MU to OW a little over a month ago [5 Synchronous Dynamic Random-Access Memory] spot pricing has tripled and in a historic sense, to find this the kind of move in DRAM pricing you’d likely to have to go back to the cycles of the 1990s,” Moore wrote. “So while in terms of the severity of shortage (according to our buyer contacts) it feels most reminiscent of 2018, MU began that cycle with earnings at about breakeven vs today where earnings are already at record levels.” The analyst continued: “We believe that’s going to move us firmly into uncharted territory from an earnings standpoint, and we think the stock has yet to fully price in the upside that’s coming. At a time when AI sentiment is pricing in positive moves — but still with some anxiety — we see room for further enthusiasm in the story in addition to the jump in earnings power.” On a blended basis, Moore sees pricing rising 15% to 20% in the first and second quarters. However, buyers who did not lock in pricing early enough could face potentially much higher transactions at 50% or more above those contracts.
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