Storage shares continued to rally on Tuesday. Micron stock surges nearly 14% as UBS after UBS raised its price target on the memory chip giant to $1,625; DRAM up over 11%; Western Digital, Rambus up around 8%; SanDisk up 6%.
Micron Technology shares have jumped 13.82% to $855 after UBS more than tripled its price target on the memory chip giant to $1,625 from $535, citing the emergence of long-term supply agreements that the firm said will structurally transform the company’s earnings profile.
In a note from analyst Timothy Arcuri, UBS said long-term agreements are now firmly in place across most of the memory industry, with up to 30% of DDR volumes industry-wide set to be locked in at pricing slightly below current levels.
The firm said these enhanced agreements, spanning three to five years with fixed volume commitments and partially fixed pricing frameworks, will allow Micron to "trade some near-term revenue for demand visibility and a smoother earnings profile."
UBS raised its earnings per share estimates to $155, $167 and $117 for calendar years 2027, 2028 and 2029, respectively, up from prior estimates of $133, $122 and $77.
The firm expects Micron to generate over $400 billion in free cash flow across the same period, with EPS remaining "comfortably >$100 throughout the period" even assuming a moderate memory downcycle in 2029.
The new $1,625 price target is based on approximately 15 times next-twelve-months price-to-earnings, with Arcuri noting he sees "no reason why MU should trade a whole lot differently than NVDA in terms of P/E."
UBS said hyperscalers have already secured approximately 60% to 70% of industry server DDR5 volumes under enhanced long-term agreements, providing Micron with guaranteed offtake on a significant portion of its most valuable product.
Elsewhere on Tuesday, Mizuho reiterated its Outperform rating and $800 price target on MU, adding that it remains a Top Pick. The firm highlighted demand confidence as “memory remains the AI backbone, with demand outstripping supply through 2026-27E.”
“We believe there’s no clear line of sight on when the supply- demand imbalance could end as demand durability sees secular long-term tailwinds with DRAM/NAND as key AI enablers,” wrote Mizuho analyst Vijay Rakesh.
