Wedbush sees potential for sharp move upwards in Micron after earnings

Investing.com -- Micron (NASDAQ:MU) shares could see a sharp move upwards if the memory chipmaker’s upcoming earnings results and guidance come in line with expectations, according to Wedbush analysts.

The company is set to report financial results for the fiscal first quarter on Wednesday. Wedbush analysts believe the results are “achievable, if not beatable” as strong September pricing and favorable mix shifts could help Micron to meet or even exceed November guidance.

Looking forward to the February quarter (fiscal Q2), the setup appears more challenging, Wedbush cautions.

Conditions for NAND and DRAM memory deteriorated significantly in November, with contract pricing settling later and lower than anticipated. This is attributed to inventory reductions by client device original equipment manufacturers (OEMs), price cuts driven by hyperscalers, and delays in some Blackwell projects, all contributing to downward pressure on memory pricing.

Despite these headwinds, Wedbush suggests that the impact on Micron's fiscal Q2 estimates could be relatively modest due to the potential benefits from the continued shift to DDR5, eSSDs, and HBM.

The firm also foresees a potential for more favorable memory economics in the second calendar quarter of 2025 and beyond, as client device OEMs are expected to have normalized inventory levels by late Q1 or Q2. This normalization could result in “memory demand more closely paralleling end market fundamentals," analysts said.

Further, increased shipments of Blackwell servers to the emerging cloud and AI customers are expected to rejuvenate memory demand from that sector.

Wedbush also predicts that hyperscale spending will continue to rise throughout the calendar year 2025, which could moderate any temporary fluctuations in memory market dynamics experienced in the fourth calendar quarter of 2024 and the first quarter of 2025.

“Exiting our recent Asia trip last week, we believe sentiment on memory was extremely negative creating room for a potential sharp move upwards in the stock should MU results/guidance roughly fit the expectations we noted above,” analysts led by Matt Bryson said in a note.

“However, we believe some of this positioning has reversed the past few days,” they added.

Overall, analysts remarked they don’t have a strong view on MU ahead of the Q1 print but see the company well-positioned for 2025.

They cite Micron's ability to transition toward a more favorable product mix, including eSSDs, DDR5, and HBM, and expect memory market fundamentals to improve starting in the second quarter of 2025 and continuing into the second half of the year.