Micron Technology, Inc. (NASDAQ: MU) shares dropped 7% yesterday after the company’s guidance for the upcoming quarter failed to impress investors. Despite this drop, Micron stock is still up more than 57% this year with investors betting on the company to emerge as a big winner of AI. Yesterday’s drop came despite Micron reporting strong earnings for the third quarter of Fiscal 2024 which ended on May 30. The company reported revenue of $6.8 billion for the quarter, a YoY increase of 82%. Operating cash flows more than doubled from $1.22 billion last year to $2.48 billion in Q3. According to the company management, demand for AI drove 50% of the sequential growth in data center revenue, which is a clear indication of how the chip giant is benefiting from the rise of AI technology.
What Happened At Micron?
Micron is facing some operational challenges stemming from geopolitical tensions between the U.S. and China. Last May, the Chinese government issued an order banning the use of Micron products in critical infrastructure projects due to potential security threats posed by the company’s ties to the United States. China is one of the key markets for Micron, and an escalation of trade tensions between the U.S. and China may significantly impact the company’s revenue growth in the coming years.
Micron, however, has positioned itself for stellar growth by focusing on high-bandwidth memory products while increasing the prices of DRAM products. The rise of AI-powered applications and AI-enabled devices will result in both GPUs and devices requiring a higher chip content, which should lead to higher demand for Micron’s AI products in the future.
What The Industry Thinks
Barclays analyst Tom O'Malley, after digesting Q3 results, commented that the company has executed its strategy to perfection and that its financial performance could not have been any better. The analyst has a price target of $145 for Micron, which implies an upside of around 10% from the current market price. Bank of America analyst Vivek Arya is also impressed with Micron’s exposure to AI and believes the company is well-positioned to see higher profit margins in the future. The analyst has a price target of $170 for Micron. Based on the ratings of 25 Wall Street analysts, the average Micron price target is $167.83, which implies an upside of 26%.
Neither Lisa Fritscher nor Stocks.News have positions in this company.
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Contributing Writer
Lisa Fritscher has been a contributing writer for App.Stock.News since 2024. Lisa has been interested in investing since winning The Stock Market Game in high school. In more than a decade as a professional writer, she has written consumer-facing financial information and advice articles for a wide variety of publications. She has a Bachelor of Arts in Psychology from the University of South Flori...