MU Stock Gains Ahead Of Q4 Earnings: JPMorgan Sees 'Constructive' Setup Amid Netlist Legal Fight

• Morgan Stanley, Wells Fargo and Citi also remain broadly positive on Micron's near-term outlook, although analysts are increasingly focused on how long the current memory shortage can last.
• Netlist launched new proceedings before the U.S. International Trade Commission alleging that certain Micron products infringe its patents.
• Wall Street expects Micron to report fiscal fourth-quarter earnings of $31.82 per share on $51.47 billion in revenue.

Micron Technology (MU) shares gained in early morning trade on Tuesday, with JPMorgan seeing a “constructive” setup for the company heading into its fourth-quarter earnings tomorrow even as Netlist (NLST) filed new legal action against the chip designer.

The firm reiterated an ‘Overweight’ rating on Micron and a $1,540 price target in a note to investors cited by TheFly, implying upside of over 46% from Monday’s close. It said that there are “multiple beat-and-raise levers still in play” for Micron.

MU stock rose as much as 1.5% in pre-market trade, with retail sentiment trending in ‘bullish’ territory over the past day on Stocktwits.  

JPMorgan Sees Multiple Upside Levers For Micron

JPMorgan said the memory market remains structurally tight across both DRAM and NAND, positioning Micron for potential upside on revenue, gross margin and earnings.

The firm also noted pricing momentum during the quarter. Micron management had previously warned of a "meaningful moderation in the rate of price increases," but JPMorgan said pricing held up through the quarter.

Investors will be watching Wednesday's results for evidence that those conditions are continuing into the next quarter, particularly given how sharply Micron shares have risen this year.

Micron Faces HBM Patent Dispute Ahead Of Earnings

Micron is also facing a new legal challenge involving its high-bandwidth memory products. Netlist said on Monday it has initiated proceedings before the U.S. International Trade Commission seeking exclusion and cease-and-desist orders against Micron and downstream customers Nvidia (NVDA), Broadcom (AVGO) and Alphabet (GOOG, GOOGL).

The ITC complaint alleges infringement of Netlist's High Bandwidth Memory patents covering technologies used in advanced AI computing.

The proceedings add another issue for investors to monitor, although the immediate focus remains on Wednesday's earnings report and Micron's outlook for memory pricing, supply and margins.

Analysts Debate How Long Micron's Memory Boom Can Last

JPMorgan is not alone in seeing a favorable near-term setup for Micron. Morgan Stanley also remained positive on Micron in an earnings preview published Monday. The firm maintained its ‘Overweight’ rating and $1,200 price target, saying near-term conditions are “still very good,” with strong demand and rising pricing.

Morgan Stanley expects earnings expectations to move higher following Wednesday's results, although “less so than prior quarters.” The firm said the bigger question is how long the current memory cycle can last. “Duration debates take longer to pay off, as there’s no real way to prove that near term,” the firm said.

That longer-term question is also central to Wells Fargo's view. Analyst Aaron Rakers cut the price target on Micron to $1,400 from $1,525 last week while maintaining an ‘Overweight’ rating, but said Wells Fargo remains bullish on Micron's near-term results.

The firm said the next phase of Micron's performance will depend increasingly on investors gaining confidence in the duration of the memory shortage, along with the expansion of Strategic Customer Agreement (SCA) engagements and Micron's execution.

Citi, meanwhile, raised its price target to $1,300 from $1,150 while maintaining a ‘Buy’ rating. Analyst Atif Malik raised estimates for Micron's August and November quarters, citing stronger DRAM pricing and continued undersupply across both DRAM and NAND. He expects Micron to report upside to its fiscal fourth-quarter estimates, helped by tight supply across its memory businesses. 

MU Stock Rally Puts Focus On Analyst Targets

Micron's stock has already risen sharply this year, leaving investors focused not only on the fiscal fourth-quarter numbers but also on how long the current memory shortage can support pricing and earnings growth.

Koyfin data showed the average 12-month price target provided is about $1,520, implying roughly 44% upside from Monday's close. Of the 49 analysts covering the stock, 35 have ‘buy’ or ‘strong buy’ ratings, three have ‘hold’ ratings and one has a ‘sell’ rating.

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