Micron Technology (MU) shares are rallying ahead of the company's fiscal third-quarter earnings report, due after the market close on June 24. The stock was up approximately 5% in Monday trading, even as the broader tech sector faced headwinds, with Alphabet, Amazon, and Meta Platforms all declining.
Wall Street expects a blockbuster quarter from the memory chip maker. Consensus estimates call for revenue of roughly $35 billion, a near quadrupling year-over-year, and earnings per share of $19.72, a tenfold increase. The explosive growth is driven entirely by the global buildout of artificial intelligence (AI) infrastructure, which is fueling demand for advanced memory products.
Bernstein Doubles Price Target to $1,300
Bernstein analyst Mark Li reiterated his "Outperform" rating on Micron on Monday and more than doubled his price target to $1,300, implying about 10% upside from current levels. Li's bullish thesis rests on two key pillars: a severe structural shortage in the dynamic random-access memory (DRAM) market and significant pricing leverage in high-bandwidth memory (HBM).
Historically, the semiconductor memory sector has been notoriously cyclical, with frequent gluts and price collapses. However, Li argues the current supply deficit is fundamentally different. Tech giants and data center operators are purchasing advanced memory architectures at an unprecedented pace to support high-performance GPUs. Because shifting production capacity to specialized AI memory constrains conventional DRAM output, industry supply is tightening across the board. Bernstein projects this disciplined supply-demand imbalance will sustain immense pricing power for Micron well into calendar year 2027.
HBM Pricing Leverage a Key Catalyst
The second catalyst is the pricing leverage inherent to high-bandwidth memory (HBM). Bernstein has shifted its valuation framework for Micron from price-to-book (P/B) to price-to-earnings (P/E), modeling unprecedented margin thresholds. The firm highlights that HBM contract prices must undergo a sharp re-acceleration to close the lingering profitability gap with conventional DRAM processing.
Micron's HBM capacity for calendar year 2026 is already fully allocated, and early 2027 visibility remains exceptionally strong. As premium-priced HBM4 and HBM3E volumes scale up, the richer product mix will dramatically expand corporate gross margins, which are already guided near a record-breaking 81% for Q3. Bernstein notes that as these favorable contract repricings materialize, they will fuel massive upward adjustments to forward consensus earnings.
Li projects that Micron's fiscal 2027 earnings capacity will ultimately land significantly north of Wall Street estimates, fundamentally justifying a much higher valuation multiple for Micron shares.
For more context on the broader AI chip demand landscape, see our earlier report: Micron Earnings to Gauge AI Chip Demand as S&P 500 Holds Near Records. Also, read about the recent tech selloff: AI and Chip Rout Sinks Nasdaq 2.2%; Dow Loses 320 Points as Micron Plunges 12%.
This article is for informational purposes only and does not constitute financial advice.
