MU Stock’s 25% Rally Hits A Wall: With Monster Results In Rear View, Analysts Debate Sustainability Of AI Memory Boom

• Micron Technology shares dropped nearly 4% on Thursday and a further 0.4% in overnight trading.
• Some analysts have flagged that Micron’s margins are near their peak and memory chip prices are beginning to stabilize.
• Retail sentiment on Stocktwits for MU dropped to ‘bullish’ from ‘extremely bullish.’

Micron shares declined nearly 4% on Thursday, despite posting blowout earnings and a forecast the previous day, putting the brakes on a sharp rally in recent weeks.

Memory chip stocks have been on a roll for about a year as surging demand from AI data centers drives shortages and pricing gains across the industry – a trend increasingly reflected in the latest quarterly earnings from major players including SanDisk, Seagate Technology, and Western Digital.

Before the results on Wednesday, Micron shares had rallied 25.5% in just eight sessions.

Over A Dozen Analysts Raised MU Price Target 

Analysts broadly believe that shares would rebound, especially given the strong forecast from Micron and signals that memory chip shortages would persist in the foreseeable future. At least 13 brokerages raised their price targets on MU stock after the company’s report, according to The Fly.

Micron’s results "were strong and guidance was even better," with demand and structural supply tightness continuing to drive pricing power beyond expectations, JPMorgan said in its investor note. It raised the price target on the stock to $550 from $350.

Goldman Sachs, which raised the MU stock target to $400 from $360, however believes the stock would remain rangebound, as elevated expectations were already priced in. 

In favourable commentary across the board, there were pockets of skepticism as well. Morgan Staleny said the results were “more bullish than most of what we heard from investors,” but the debate is now about "more about duration than peak amplitude.”

Similarly, Bank of America flagged that spot prices have generally begun to stabilize and that gross margins may be near peak levels. Wedbush contended the theory, arguing that it believes gross margins might peak near 90% later this year and the focus should move to earnings durability.
 

Source: The Fly

Retail’s View

About 73% of respondents to a Stocktwits poll said MU would run past $500, implying an over 13% gain from the current level. Only 15% believe the stock would trade between $440 and $480.
 

Stocktwits sentiment for Micron dropped to ‘bullish’ as of early Friday, from ‘extremely bullish’ just after the results release on Wednesday.

Micron Q2 Recap

Micron’s second-quarter revenue nearly tripled to $23.86 billion from $8.05 billion, handsomely beating analysts’ expectations of $19.18 billion. Adjusted profit of $12.20 per share also beat the $8.66 target.

The company forecast third-quarter sales with a mid-point of $33.5 billion versus the Street projection of $22.48 billion.

However, rising capital expenditure was a minor concern. CapEx jumped 62% to $5 billion last quarter; the company projected $7 billion for the current quarter and more than $25 billion for the fiscal year 2026.

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