It’s different this time.
That’s the call from UBS analyst Timothy Arcuri, who more than tripled his price target on memory specialist Micron to $1,625 from $535. If his view were realized, the company would be worth north of $1.8 trillion.
Shares are surging 8% in early trading, and are up more than 780% over the past year. The AI boom’s brainpower needs to “remember” (that is, access) the information it’s processing, driving a spike in memory chip prices.
Despite Micron going up and to the right for months on end, Arcuri argues that a) its future profitability is still underappreciated, and b) investors should be willing to pay more for these earnings, because a large chunk of demand is already locked down.
Micron’s forward price-to-earnings ratio is about 8.25x versus 20.9x for the S&P 500 as a whole, which is effectively investors’ way of showing they expect the company’s pricing power and runaway profit growth will sour.
“We believe the market will start to put a more ‘normal’ multiple on the stock and Micron will continue to re-rate higher as more details emerge about the structural changes AI has driven to the entire memory complex,” he wrote.
Long-term purchasing agreements are providing strong visibility to the ample runway for high profits through 2029, per Arcuri, which will help the company avoid its typical boom-bust cycle.
These supply pacts “allow Micron to trade some near-term revenue for demand visibility and a smoother earnings profile,” he concluded.
The sunny sentiment on Micron is also lifting peers, with Sandisk, Western Digital, and Seagate Technology Holdings all up between 2.8% and 3.9% as of 8:50 a.m. ET.