Memory prices have been on a tear. Just how much will that flow through to Micron's profits?
Wedbush analyst Matt Bryson expects Micron to report upbeat guidance in its fiscal second-quarter earnings release next Wednesday.
Memory prices have been caught in a frenzy in recent months, and analysts don't see demand letting up. For Micron Technology, the real question concerns the extent to which this pricing boom manifests in its upcoming financial results.
The surge in memory prices is taking place "at a rate that I haven't seen in the 25 years I've been covering the industry," Wedbush analyst Matt Bryson told MarketWatch. He expects tight supply to continue to drive increased demand until 2028.
At the end of February, overall DRAM contract prices were up an estimated 92% relative to the end of December on a weighted-average basis, while the growth in NAND prices translated to 109% over the same period, according to Bernstein analysts.
But it's not so easy to project the financial impact for Micron, even as analysts generally expect a massive profit boost. The FactSet consensus implies expectations for a 465% surge in February-quarter adjusted earnings per share relative to a year before. But the company reports earnings off the traditional cycle, which complicates the modeling process, and it has long-term agreements with some customers.
Investors do seem encouraged heading into Wednesday's earnings report, with Micron shares $(MU)$ up 5% on Friday to rank among the top performers in the S&P 500 on the day. Shares of fellow memory and storage companies Western Digital and Sandisk $(SNDK)$ up 4% and 6%, respectively, while shares of Seagate Technology Holdings $(STX)$ were up 2.6%.
Bryson noted that increased inference workloads have been driving memory pricing consistently higher, especially since the middle of last year. Artificial-intelligence agents require enormous amounts of dynamic random-access memory.
Front and center for Micron earnings next week will be contract memory pricing, said Bryson, who holds an outperform rating on the stock and raised his price target to $500 from $320 on Friday.
Deutsche Bank analyst Melissa Weathers recently wrote that she expects DRAM supply constraints to persist through next year. She said in a Tuesday note that the extent to which Micron can capture market share for HBM4 - high-bandwidth memory chips used for AI - is another topic of interest heading into the earnings call.
Bryson noted that Nvidia's GPU Technology Conference next week is likely an additional catalyst. He expects Nvidia to give a positive outlook on memory demand at the event.
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