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Micron Technology, Inc. (MU): Top Analyst Dishes on Positive Insights from Series of Investor Meetings

Rajvindra Gill sees plenty of tailwinds ahead for this chip giant to capture market share after meeting with MU's leadership team.


Top analyst Rajvindra Gill at Needham is out with a vote of confidence on Micron Technology, Inc. (NASDAQ:MU) after hosting a series of investor meetings last week with the chip giant’s leaders: CEO Sanjay Mehrotra, CFO Dave Zinsner, and IR head Shanye Hudson.

Addressing the recent dip in the stock on back of investors’ apprehensions pointing to oversupply, waning NAND pricing, and rising capital expenses, Gill calls the timing “opportune” for this meeting.

On back of his insights gained from these meetings, the analyst reiterates a Strong Buy rating on MU stock with a $76 price target, which implies a 51% upside from current levels.

“We argue that the DRAM industry is entering a permanent phase of structurally lower bit supply growth where the amount of bits per wafer generated becomes less as you migrate further down the process node. Meanwhile, CapEx intensity accelerates as more expensive equipment, clean room space and complex steps are needed (the technological complexity increases as you go below 1x) – which creates significant manufacturing barriers to entry. Moreover, across the three dominant DRAM suppliers, bit supply growth is a function of process node transitions, NOT wafer additions. And for Micron specifically, the company is not adding wafers. Therefore, we expect 20% bit industry supply growth to remain the target while demand drives could easily be 2x. Moreover, our discussions lead us to believe Micron is rapidly closing the cost gap between itself and Samsung on DRAM and has exhibited the highest and fastest yields on 1xnm in the history of the company,” writes Rakesh.

Regarding NAND, Gill recognizes a meaningful upper hand when it comes to cost against other chip makers in the field, noting that Micron exhibits the smallest die size on its 64-layer 3D NAND solution.

Glancing ahead to the company’s analyst day next month, Rakesh anticipates targets to be laid out on MU’s capital return policy along with a new set target cash balance- the analyst estimates $10 billion. This will be a big positive for Micron, wagers Rakesh, who sees the target cash balance as offering breathing room should a down cycle hit- meaning “less risk to the model, and a higher valuation multiple.”

As early as the third quarter, Rakesh bets MU can hit a net cash position. Long-term, the analyst projects $8 to $9 billion of free cash flow, which will cultivate prospects for stock buybacks. Investors should expect share gains ahead in three markets: client SSD, enterprise, and smartphone amid Micron’s evolution to becoming a system supplier, with Rakesh concluding “there are ample tailwinds to gain share.”

Rajvindra Gill has a very good TipRanks score with a 65% success rate and an impressive ranking of #27 out of 4,765 analysts. Gill yields 21.7% in his yearly returns. However, when recommending MU, Gill forfeits 10.4% in average profits on the stock.

TipRanks showcases the chip giant as one of Wall Street’s best-liked stocks. Out of 20 analysts polled in the last 3 months, 17 are bullish on MU stock while 3 remain sidelined. With an encouraging return potential of 48%, the stock’s consensus target price stands at $74.32.