DA Davidson initiated coverage of Micron (NASDAQ: MU) on Tuesday, April 28, giving it a “Buy” rating and an unprecedented $1,000 price target.
In the research note, the firm argued that artificial intelligence (AI) has led to a “longer-than-usual memory cycle,” adding that compute deployment and demand generation continue to reinforce each other in a positive feedback loop.
“We believe artificial intelligence is creating a longer-than-usual memory cycle as compute deployment and demand generation exist in a positive feedback loop, creating a structurally higher ceiling for memory pricing and demand,” analyst Gil Luria wrote.
This, in turn, raises the memory pricing and demand ceiling, and DA believes the market is still underestimating Micron’s position to benefit from it, especially relative to its semiconductor peers.
The new $1,000 price target is currently the highest Wall Street estimate, topping the previously most bullish estimate of $700, which came in just a day earlier from Melius Research. Compared to the last closing price of $524, the DA Davidson figure implies a roughly 90% upside.
Is Micron a new compute leader?
As mentioned, Luria’s bullish stance hinges on the idea that the memory market is no longer bound by the traditional cycle. That is, while demand has historically had a defined ceiling, defined by overblown capacity expansions and eventual compressing margins, AI has fundamentally altered that dynamic.
Now, the note argued, each wave of compute deployment helps create entirely new use cases, effectively generating fresh demand. Likewise, Luria highlighted the growing importance of long-term supply arrangements. More specifically, Micron’s reliance on multi-year agreements improves demand visibility and adds a layer of pricing stability that the industry has historically lacked.
Furthermore, the analyst pointed to Micron’s manufacturing edge, citing four consecutive generations of leadership in DRAM and three in NAND. This node advantage, he argues, compounds over time by lowering costs and strengthening competitiveness.
“The market is still framing the cycle through the lens of prior downturns, which appears to underestimate the demand environment, especially relative to the rest of the semi complex… Combined with Micron’s node leadership and what we see as a long duration earnings power story, we see meaningful upside to shares,” the note concluded.
Is Micron stock a buy?
DA Davidson’s new figure becomes even more impressive when compared to the average MU share price target for the next 12 months, which sits at $574.67. Based on 30 analyst notes tracked by TipRanks in the last three months, the average forecast implies a 9.55% upside.
Overall, with 27 ‘Buy,’ three ‘Hold,’ and no ‘Sell’ ratings recorded on the same platform, Micron stock enjoys a ‘Strong Buy’ Wall Street consensus.
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