Micron Technology (MU) shares advanced on Wednesday, bucking a broader market pullback driven by rising oil prices and higher Treasury yields. The move came after DA Davidson analyst Gil Luria increased his price target on the memory-chip maker to $3,000 from $2,100, implying roughly 190% upside from the stock's recent trading level.
Luria's bullish stance is rooted in the belief that investors are still "early in their journey" in understanding Micron's growth potential. He argues that the market has yet to fully price in the company's expected earnings expansion over the next three to five years, and that the current valuation remains unusually low relative to projected earnings growth.
The new target assumes Micron will trade at about 19 times estimated earnings per share for fiscal 2027, which ends in August. Currently, the stock trades at roughly six times those estimates, according to Dow Jones Market Data. Micron shares have already surged about 230% this year, but the valuation multiple has contracted as earnings expectations have risen faster than the share price.
Tight Memory Supply and AI Demand
A central pillar of Luria's thesis is that memory chip supply will remain constrained for several years, even as demand from AI data centers accelerates. AI systems require substantial amounts of advanced memory, particularly high-bandwidth memory (HBM), which is critical for AI accelerators.
"Memory is a lever for better AI performance. AI models generate better results with more memory, run faster with more memory," Luria wrote. This dynamic could give Micron greater pricing power if supply stays tight while chipmakers and cloud providers continue expanding AI infrastructure.
Micron is one of the world's leading suppliers of DRAM and HBM memory, positioning it to benefit from the increasing memory intensity of AI servers.
Potential Buyback Catalyst
Luria also highlighted a potential share repurchase program as another catalyst. Micron is expected to launch a major buyback in December after restrictions tied to its U.S. CHIPS Act funding expire. Buybacks reduce the share count, which can boost earnings per share and support a higher valuation, especially when earnings are already growing rapidly.
Taiwan Labor Dispute Adds Uncertainty
Separately, a union representing workers at Micron's Taiwan operations said Wednesday that its members had authorized a strike over a dispute regarding bonus and profit-sharing arrangements. The union, representing employees in Taoyuan, reported that 1,994 members—99% of those who voted—supported strike authorization. The timing and details of any industrial action have yet to be decided.
Taiwan is a critical manufacturing base for Micron, particularly for DRAM and HBM chips used in AI servers. A strike could add another layer of uncertainty to an already tight global memory market. The union said it still hopes Micron will present a concrete profit-sharing proposal before workers resort to a strike, and it is encouraging members to attend a rally in Taipei on October 19, which it said would not constitute a strike.
Micron employs around 15,000 people in Taiwan, with separate unions representing workers at its Taoyuan and Taichung facilities. Together, they represent more than 80% of the company's Taiwan workforce. Mediation between Micron and the Taoyuan union ended without an agreement in September, while negotiations with the Taichung union remain ongoing.
The dispute centers on Micron's rewards for fiscal 2026, announced in September after what the company described as an "extraordinary year." More than 60,000 employees globally were eligible for rewards, including a T$1 million ($31,386) cash bonus for Taiwan employees. The Taoyuan union said the package did not address its demand for a permanent profit-sharing mechanism and criticized Micron for announcing the rewards while mediation was underway.
Micron said Wednesday that it takes employees' concerns seriously and remains committed to engaging with its unions in good faith. "We will continue to work through the established dialogue and mediation processes," the company said, adding that it would hold another mediation session with the Taichung union later this month. Taiwan's labor ministry said it respected the union's strike vote and urged Micron to consider workers' concerns and continue negotiations.
This article is for informational purposes only and does not constitute financial advice.
