BofA raises target on Micron Technology stock to $170: Can it reach there?

Micron Technology Inc. (NASDAQ: MU) recently received a significant boost as Bank of America (BofA) raised its price target on the stock to $170 from $144, reflecting increasing confidence in the company’s prospects.

This update comes amid the growing momentum of artificial intelligence (AI) applications transitioning from cloud computing to consumer devices such as PCs and smartphones. The firm also revised its price target on Arm Holdings (NASDAQ: ARM) due to similar reasons, indicating a broader optimism in the semiconductor sector driven by AI advancements.

Other analysts’ views and ratings

BofA is not alone in its optimism. UBS recently maintained its Buy rating on Micron,  while raising the price target from $125 to $155. UBS analysts cited favorable trends in DRAM and NAND memory pricing and noted that the industry’s capacity constraints could extend the current pricing cycle.

They expect Micron’s gross margin to peak later than initially projected, which should positively impact the stock’s valuation.

Citi also maintains a bullish stance on the semiconductor sector, despite recent fluctuations in sales figures. Citi analyst Christopher Danely pointed out that the anticipated inventory replenishment in 2024 could further bolster chip sales.

He remains confident in Micron’s position, particularly given the ongoing strength in DRAM pricing and the expected rise in memory demand driven by AI and other advanced applications.

Micron’s fundamental strengths

Micron’s business fundamentals are robust, underpinned by its strategic positioning in the AI and memory markets. The company has been optimizing its operations and capital expenditures to align with the anticipated surge in demand for advanced memory solutions.

Management has indicated that as customers normalize their inventory levels, a strong upswing in purchasing is expected, especially in the latter half of 2024 and throughout 2025, driven by the buildout of AI factories.

The firm’s earnings outlook is positive, with analysts revising their estimates upwards significantly over the past 90 days. This optimism is reflected in the upcoming earnings report scheduled for June 26, 2024, where expectations are high for both top-line growth and margin expansion.

The focus on high-margin products such as HBM3E chips, which offer superior performance and power efficiency, is expected to drive substantial revenue growth and profitability improvements.

Valuation and future prospects

Due to the recent stock price surge, Micron’s valuation remains a topic of discussion among investors. However, the ongoing AI-driven demand for memory solutions, coupled with Micron’s strategic product launches and capacity expansions, suggests that the company is well-positioned for sustained growth.

The stock has shown resilience and a strong recovery from previous downturns, supported by its technological advancements and market share gains in critical segments.

Looking ahead, Micron’s ability to capitalize on the AI infrastructure buildout, particularly in data centers and enterprise applications, is expected to drive significant revenue and margin expansion.

The continued ramp-up of HBM3E production and the anticipated introduction of HBM4E chips further bolster the company’s growth prospects.

Now, let’s delve into the technical analysis to explore what the charts indicate about Micron’s price trajectory. Technical analysis involves examining past market data, primarily price and volume, to forecast future price movements. For Micron Technology Inc. (MU), the recent price charts reveal several key patterns and indicators that merit close attention.

Can it reach $170?

Micron’s stock saw a significant down move in 2023 when it fell from above $90 to below $50. This downtrend ended in early 2023, when the stock started climbing higher, first at a slow pace and then starting in February this year at a rapid pace which saw it jumping from $80 levels to above $140 in a few weeks.

MU chart by TradingView

Across all timeframes, the stock is currently displaying tremendous bullish momentum. Hence, traders who want to short the stock must refrain from doing so until the stock drops below its 50-day moving average.

Investors who want to purchase the stock at current levels can do so as currently, it is in the grip of bulls. However, they must embrace significant volatility in the short term. If the bullish momentum continues, the stock can reach $170 in the coming months. The bullish momentum can reverse its course if the stock falls below $108.8 in the short term.

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