Deutsche Bank analysts believe Micron Technology (NASDAQ:MU) still faces certain "near term risks," but is likely to see a "better recovery in 2H CY23," as they raised the Price Target to $65 from $55, and maintained a "Hold" rating ahead of the company's Q3 earnings report.
In their latest note on Micron, the analysts highlight the broader supply-demand shifts in the memory industry: with Samsung's (KS:005930) decision to cut production, and AI-related spike in memory demand, "we have yet to see an inflection in pricing, but the market is moving in the right direction."
Despite the volatile yet strong demand in the memory sector, analysts also point out the general macro uncertainty: "End demand has worsened especially in servers, and we still need to better understand the extent of strategic buys (mainly in IT Hardware) on future demand trends," as well as the recent geopolitical struggles MU has faced: "things are getting more complicated, with China officially banning MU's products from key infrastructure projects."
Still, overall the analysts believe "recent developments likely remove the downside scenario," and estimate "that memory prices should stabilize earlier that we previously expected, while non-U.S. suppliers could see a stronger recovery," as they raise "estimates for MU for 2H CY23 and CY24," and consequently raise the Price Target to $65 from $55.
Deutsche Bank maintains a Hold rating on the stock, noting it "appears to have already priced in a strong recovery, and we believe upside from the current level is limited."
Micron is set to report Q3 earnings on Wednesday, June 28th, after market closes. The analysts currently project revenues of $3.67 billion and EPS of negative ($1.56).
Shares of MU closed at $65.43 on Friday, and are up nearly 30% YTD.