Micron Technology is grinding higher ahead of its earnings report next week. Its gross-margin and capital-spending guidance could be catalysts for a further rally, according to BofA Securities analyst Vivek Arya.
Micron shares were up 1.96% at $1,101.74 Friday morning, having gained 16% in the past month.
Investors look to be buying in ahead of Micron's fiscal fourth-quarter earnings on Sept. 30. Arya shares their optimism, reiterating a price target of $1,550 and a Buy rating on the stock in a research note.
Micron doesn't typically offer pricing guidance, so the first key number to watch is the company's gross-margin forecast. If Micron signals confidence in a margin in the mid-80% range for fiscal 2027, consensus estimates for annual earnings per share could remain around $150 to $200, according to Arya.
The other number to watch is capital spending. Arya forecasts $40 billion to $50 billion in spending for fiscal 2027. That would indicate a "disciplined" addition of cleanroom capacity while also leaving space for a resurgence in stock buybacks once Micron can resume them under the terms of its Chips Act funding in December.
Arya is less concerned than some investors about whether Micron's long-term contracts, which lock in prices, can protect it during a downturn.
"If AI capex remains durable, Micron's earnings power and valuation remain compelling; if AI spending weakens, customer purchases and future capacity additions will both adjust," Arya wrote. "The key question is not whether contracts can smooth the cycle, but whether AI investment remains strong enough to sustain it."
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