On Thursday, Wells Fargo updated its financial outlook for Micron Technology (NASDAQ:MU), raising the share price target from $125.00 to $135.00 while maintaining an Overweight rating. The adjustment comes amid positive developments in Micron's product offerings and market positioning.
The firm's analysis highlighted Micron's High Bandwidth (NASDAQ:BAND) Memory (HBM3E) as a significant factor, noting that the company's HBM3E capacity for the calendar year 2024 has been sold out, with the vast majority of 2025's supply already allocated.
Micron has reiterated its expectation of generating hundreds of millions in revenue in 2024 and aims to achieve a comparable market share of over 20% in DRAM sometime in 2025. Additionally, the gross margin percentage for HBM3E DRAM is projected to be accretive in the fiscal third quarter of 2024.
The report also touched on the momentum in artificial intelligence (AI) and a recovery in traditional server shipments, forecasting server shipment growth in the mid to high single-digit percentage range year over year for 2024. The traditional server market's recovery is seen as an incremental positive catalyst, alongside the sustained momentum in AI applications.
Micron's expectations for normalized customer inventory in the first half of 2024 were reiterated, with an improved pricing outlook in both DRAM and NAND for the calendar year 2024. The firm's capital expenditure guidance for fiscal 2024 remains unchanged at $7.5 billion to $8.0 billion, with wafer fabrication equipment (WFE) spending expected to decrease compared to the previous year.
Lastly, the firm's commentary affirmed confidence in Micron's technological execution. Approximately 75% of Micron's DRAM bits are now on 1-alpha and 1-beta nodes, and over 90% of its NAND production is at 176 or 232-layer nodes. The commencement of volume production for 1-gamma DRAM using extreme ultraviolet (EUV) lithography is set for the calendar year 2025.
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