Key Takeaways
- Citi boosted Micron’s price target to $510 from $430, maintaining a Buy rating following exceptional quarterly results
- UBS increased its target to $510 from $475 with a Buy rating, noting potential margin peak concerns
- The company delivered February quarter revenue of $23.9B with EPS of $12.20, surpassing consensus by 21% and 36% respectively
- Forward guidance for May quarter projects $33.5B in revenue and $19.15 EPS, exceeding analyst expectations by 42% and 70%
- A five-year strategic customer agreement was announced, indicating robust long-term demand for memory products
Micron Technology (MU) experienced a paradoxical market response this week. Despite delivering results that significantly exceeded Wall Street’s projections, the memory semiconductor manufacturer saw its shares decline approximately 4% during after-hours trading.
This counterintuitive market behavior drew scrutiny from market observers. Wall Street analysts identified two primary factors behind investor hesitation: elevated capital expenditure projections for fiscal 2027, and anxiety surrounding the potential peak of gross margin expansion. The company’s guidance called for 81% gross margins, a figure that actually exceeds Nvidia’s 75% margin profile.
Profit-taking following a substantial pre-earnings rally likely contributed to the selloff as well. Shares had climbed an impressive 354% over the preceding twelve months before the earnings announcement.
By Friday’s opening bell, Micron shares showed minimal movement in premarket activity.
Citi’s Atif Malik maintained his Buy recommendation while elevating his price objective to $510 from $430. He highlighted margin performance exceeding forecasts as the primary catalyst for his increased conviction.
Malik articulated the investment debate surrounding the stock effectively. Investors are evaluating whether MU can sustain its upward trajectory alongside rising DRAM pricing — reminiscent of the Windows PC DRAM expansion during the 1990s — driven by robust AI infrastructure demand and constrained fabrication capacity additions. The alternative scenario involves price moderation following the sharp first-quarter surge.
He suggested the stock could maintain current levels while noting potential near-term capital rotation toward semiconductor equipment manufacturers given the elevated capex guidance.
UBS’s Timothy Arcuri similarly raised his price target to $510 from $475 while maintaining a Buy rating. While recognizing the impressive quarterly performance and raised guidance, his outlook appeared more cautious regarding future gains.
Margin Outlook and Strategic Partnerships
UBS observed that with gross margin guidance now exceeding 80%, a substantial portion of potential upside from additional beats may already be reflected in current valuations. The firm’s historical analysis suggests Micron shares typically reach peak valuations approximately nine months before margin peaks.
The firm also highlighted new strategic customer agreements that could pressure margins in the near term. These arrangements involve customers accepting certain revenue trade-offs in exchange for extended supply guarantee periods.
The initial agreement spans five years — a duration exceeding UBS’s expectations. According to UBS, customers only commit to such extended arrangements when they consider memory components strategically essential. The firm believes market participants typically reward companies for demonstrating business durability, and these contracts signal enduring structural transformation.
Exceptional Financial Performance
The February quarter financial results were unambiguous. Revenue reached $23.9 billion with earnings per share of $12.20, exceeding analyst consensus estimates by 21% and 36% respectively.
The May quarter outlook proved even more striking. Micron forecasted revenue of $33.5 billion and EPS of $19.15 — outpacing Wall Street expectations by 42% and 70%.
Numerous additional analysts elevated their targets following the release. Cantor Fitzgerald increased its target to $700, Rosenblatt Securities moved to $600, Wolfe Research raised its target to $550, and BNP Paribas Exane highlighted Micron’s strategic positioning for an extended AI data center infrastructure expansion cycle.
Bernstein SocGen reaffirmed an Outperform rating, emphasizing increasing average selling prices. Pricing strength across Micron’s DRAM and NAND product lines emerged as a recurring theme throughout analyst commentary.
As of Friday’s session, MU traded at $443.52.
