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Despite the strong headline numbers, concerns over gross margins and near-term pricing pressure weighed on sentiment. The company's fiscal Q2 revenue declined 8% sequentially, reflecting weaker demand in certain segments.
Micron Technology (MU) shares fell more than 3% in pre-market trade Friday, despite the company posting second-quarter results that topped expectations and multiple analysts raising their price targets.
The memory chipmaker reported earnings per share (EPS) of $1.56, exceeding analysts’ estimates of $1.42, according to Koyfin. Revenue came in at $8.05 billion, surpassing the expected $7.9 billion.
Despite the strong headline numbers, concerns over gross margins and near-term pricing pressure weighed on sentiment. The company's fiscal second quarter (Q2) revenue declined 8% sequentially, reflecting weaker demand in certain segments.
Wall Street's reaction was largely optimistic, but some highlighted margin pressures that could cap the upside, according to reports on TheFly.
Citi lowered its price target on Micron to $120 from $150, citing concerns that gross margins may not reach previous cycle highs. However, it maintained a 'Buy' rating, expecting a recovery in DRAM pricing due to improving supply-demand dynamics.
Wedbush, Barclays, and Morgan Stanley acknowledged near-term margin pressures. Wedbush noted a “somewhat below” gross margin outlook, while Morgan Stanley specifically pointed to weaker May margins.
However, Barclays and Morgan Stanley foresee a stronger performance in the latter half of the year, with Barclays highlighting that the company is set up for a strong second half “across the board.”
Barclays raised its price target on Micron to $115 from $110 and kept an ‘Overweight’ rating on the shares, while Morgan Stanley raised its price target to $112, up from $91, with an ‘Equal Weight’ rating on the shares.
Both Wedbush and Morgan Stanley contrast the challenging commodity memory market with robust AI-related performance. Morgan Stanley explicitly sees Micron as more of an AI story than a commodity memory play, while Wedbush highlights how HBM growth countered difficult end-market conditions for commodity products.
Wedbush raised its price target to $130 from $125, with an ‘Outperform’ rating on the shares.
Baird took the most aggressive stance, raising its price target to $163, up from $130, with an ‘Outperform’ rating on the stock, arguing that Micron’s improving fundamentals are still not fully reflected in the stock price.
“HBM and LPDDR, both 60% gross margin product lines over time, are ramping at a pace reminiscent of the early days of NAND flash and demonstrate Micron is a company diametrically different from its past,” it said in its note to investors.
“HBM TAM was raised for the second time, while 12H ramp will drive margin expansion. We expect DRAM and NAND pricing stabilization in C3Q and a slight sequential increase in pricing in C4Q,” it added.
On Stocktwits, retail sentiment around Micron’s shares flipped to ‘extremely bullish’ from ‘bearish’ a day ago, with chatter increasing to ‘extremely high’ levels.
One user said they expect Micron’s price to bounce back once the market opens.
Micron’s stock has gained 21% year-to-date and is up over 8% in the past 12 months.
The stock tested its 200-day simple moving average (SMA) on Thursday, a key technical level that traders are watching for a potential breakout.
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