Investors follow the analysts.
Micron Technology (MU -3.79%) stock is falling in Thursday’s trading. The memory-chip company’s share price was down 3.9% as of 3:15 p.m. ET, according to data from S&P Global Market Intelligence. Shares had been down as much as 7.2% earlier in the daily session.
Micron stock is falling in conjunction with the release of two price-target cuts from analysts. The company’s share price is now down roughly 43% from the high that it reached earlier this year.
Micron stock gets hit with two big price-target cuts
Raymond James published a mixed note on Micron before the market opened this morning. While the firm maintained an outperform rating on the stock, it lowered its one-year price target from $160 per share to $125 per share. The lead analyst on the stock cited recent comments from company management pointing to lower sales volume growth in its non-high-bandwidth-memory (HBM) DRAM (dynamic random access memory) and NAND markets as a reason for the target cut.
Exane BNP Paribas also published new coverage on Micron stock today, downgrading its rating on the stock from outperform to underperform and slashing its price target from $140 per share to $67 per share. While the firm thinks near-term headwinds for the business are well understood by investors, it also anticipates that the business will underperform its peers in the artificial intelligence space because HBM supply will cause DRAM memory solutions to lose pricing power faster than expected.
What comes next for Micron stock?
Micron stock rocketed higher throughout the first half of 2024 thanks to expectations that the business would see sustained tailwinds from artificial intelligence trends. But some investors have started to question whether these tailwinds will be as strong as anticipated.
In its recent coverage on Micron, Raymond James’ analysts stated that the long-term growth outlook for HBM solutions suggests that the stock deserves higher valuation multiples than it currently commands. On the other hand, the coverage from BNP Paribas raises concerns that high-bandwidth-memory technologies will actually diminish pricing power for the company’s other offerings. As a result, its earnings target for Micron in 2025 is 34% below the average analyst estimate, and its target for 2026 is 45% below the average Wall Street target.
The widely differing takes from Rayond James and BNP Paribas highlight the difficulties in predicting what comes next for the memory chip market. Bullish investors have been hoping that the rise of AI technologies would power strong growth for new-generation HDM solutions while also keeping demand and prices for DRAM high. BNP Paribas’ outlook for the company stands out for being significantly more negative than most other analysts on Wall Street, but the possibility that product cannibalization will cause Micron to miss performance expectations is one that investors should consider.
Keith Noonan has positions in Micron Technology. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.