Micron Technology Inc. has experienced a significant decline in its stock value recently, following a critical report from BNP Paribas Exane. The firm predicts that shares will continue to lag behind those of competitors linked to artificial intelligence (AI) as oversupply issues loom large.
The valuation conundrum surrounding Micron became more pressing when analyst Karl Ackerman downgraded the stock from an outperform to an underperform rating, reducing his price target to a lowly $67 from a previous $140. This stark contrast stands out since over 90% of other analysts maintain buy ratings, with an average target price hovering around $156, suggesting a potential upside of more than 80% from current levels.
Ackerman’s analysis warns of a looming capacity oversupply for high-bandwidth memory (HBM) chips, which he believes will trigger a swifter than expected market correction affecting average selling prices (ASPs) for dynamic random-access memory (DRAM). The unfortunate aftermath was evident as Micron’s shares plummeted by 6% to approximately $85.21, marking a more than 40% decline since their peak in June. Notably, this is poised to be the stock’s lowest closing price since February.
Despite the recent downturn, Micron’s valuation might be seen as attractive; it trades at less than nine times its estimated earnings, making it one of the finest bargains in the Nasdaq 100 Index. For comparison, fellow chipmaker Nvidia trades at around 33 times its future earnings, illustrating a marked divergence in how the market is currently valuing these tech giants.
Some bullish proponents argue that Micron’s selloff may have created an opportunity, positioning the stock for a turnaround. Raymond James remains optimistic, citing that the near-term challenges are already reflected in the stock’s price. The firm is optimistic about Micron achieving its HBM objectives and believes ongoing yield improvements may positively affect future profit margins.
Investors are closely watching as Micron prepares to disclose its fourth-quarter earnings later this month. This pivotal report could either reaffirm the bearish outlook or provide a platform for recovery, depending on the company’s results and future projections surrounding demand for its HBM technology—especially in a landscape increasingly dominated by AI.
Furthermore, recent trends indicate that while Micron faces headwinds, the market’s appetite for chips, particularly driven by AI advancements, could shift dynamics. The upcoming earnings call presents a crucial moment for the company as it seeks to reassure investors and prove its resilience in a changing technological climate.
With volatility expected, Micron’s story highlights the intricate balance and challenges facing tech stocks in an era where AI is revolutionizing the industry. Investors and analysts alike await the unfolding narrative that could redefine Micron’s market trajectory as it contends with both strategic opportunities and formidable challenges.