The Stock of Micron is Among the Best Performers in the S&p 500 This Year. Here's Why It Just Got Upgraded

Micron Technology Inc. has demonstrated a robust start to the year, experiencing a notable 34% surge in value thus far in 2024.

‍

Despite this positive momentum, Baird analyst Tristan Gerra has chosen this moment to upgrade the memory-chip company's stock. Acknowledging that the timing may appear belated, Gerra pointed out that Micron shares have recently experienced a slight downturn, declining by just over 10% from their peak close in early April.

‍

Gerra justified his decision, citing promising developments in dynamic random-access memory (DRAM), a key market for Micron. According to his recent channel checks, DRAM pricing is stronger than anticipated, setting the stage for favorable prospects over the next 12-18 months. In light of these insights, Gerra elevated his rating on Micron shares from neutral to outperform and adjusted his price target upward to $150 from $115.

‍

The analyst highlighted Micron's ability to capitalize on the positive pricing trends in DRAM. Specifically, he noted that customers are expected to increase their inventories of DDR5 memory offerings, maintaining a 15% price premium over DDR4 in the coming quarters.

‍

Moreover, Micron stands to benefit from the growing demand for high-bandwidth memory, particularly in the context of the burgeoning artificial intelligence (AI) sector. Gerra identified high-bandwidth memory as a potential new supercycle, presenting Micron with substantial gross margin upside potential akin to the early stages of the NAND ramp. He predicted that Micron's HBM3E product could yield a gross margin exceeding 60%, with the company securing a high-single-digit market share by the end of the calendar year.

‍

In light of these favorable prospects, Gerra identified Micron's stock as one of his top picks within the semiconductor sector, alongside shares of Nvidia Corp., Broadcom Inc., and SMTC Corporation.

‍

Market response to Gerra's upgrade was positive, with Micron shares rising nearly 3% in premarket trading on Monday. Notably, the stock has already emerged as one of the top performers in the S&P 500 index this year, ranking ninth as of the close of trading on Friday.

‍