Nasdaq memory stock Micron (NASDAQ: MU) has had an incredible run. Over the last year, it’s soared around 850%. Can it keep rising?
Analysts at UBS clearly think so – check out their latest price target.
A massive increase
UBS’s new price target for Micron is $1,625. That represents a huge increase – their old target was just $535 (that kind of increase is almost unheard of).
It also represents a huge potential gain from here. If it was to come to fruition, investors could be looking at a gain of almost 80%.
Source: Google Finance A game-changer for Micron
In its research note, UBS analyst Timothy Arcuri said that long-term supply agreements with hyperscalers are now firmly in place across most of the memory industry. His view is that these long-term agreements will structurally transform Micron’s earnings profile.
Looking ahead, UBS now expects the memory company to generate earnings per share of $155, $167, and $117 for calendar years 2027, 2028 and 2029 respectively, up from previous estimates of $133, $122, and $77.
The new $1,625 price target is based on around 15 times next-12-month earnings, with Arcuri noting he sees “no reason why Micron should trade a whole lot differently than Nvidia in terms of P/E“.
Is there an investment opportunity here?
Should investors consider buying Micron stock given this bullish sentiment? That’s hard to say – this is a bit of a tricky one.
On one hand, demand for memory (from hyperscalers) is sky-high right now. This is allowing Micron and other memory companies to charge significantly higher prices for their products, which is leading to sharply higher revenues and earnings.
Meanwhile, the memory companies are locking in long-term supply agreements as mentioned above. This is a major development because historically, memory demand has been very up and down (in 2023 Micron’s revenue fell around 50%).
Another positive is the valuation, which is still low despite the enormous share price increase here over the last year. If we take that 2027 earnings figure above, we get a price-to-earnings (P/E) of around six!
On the other hand, there’s a chance that cyclicality could return to the memory chip market. At some stage in the next few years, we could see demand from hyperscalers fall as AI systems become more efficient.
We could also see more companies enter the market given the huge profits that Micron and others are making right now. This risk shouldn’t be ignored – unlike GPUs, memory chips tend to be commoditised meaning that they are all relatively similar.
One other risk is the fact that the stock is up 850% over the last year and the chart is parabolic. I’ve seen plenty of moves like this in 25 years of investing and they often end badly.
Weighing up the bull case and the bear case, I’m going to sit on the fence and take a neutral view. A small position here could be worth considering if one is comfortable with the risks but I do see this stock as very risky after its huge move higher.
In my view, there are better growth stocks to consider buying today.
Should you invest £5,000 in Micron Technology right now?
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Edward Sheldon owns shares in Nvidia and Nasdaq
The post Analysts at UBS just set a jaw-dropping price target for Nasdaq stock Micron appeared first on The Twelfth Magpie.
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