Wells Fargo: Despite the short-term margin decline, the long-term potential remains intact, and the bank maintains its "Overweight" rating on Micron Technology (MU.US).

Wells Fargo published a new research report stating that despite Micron Technology (MU.US) expecting a decline in gross margin in the third quarter, the bank's analyst remains optimistic about the long-term growth potential of the memory chip giant and maintains the stock "Overweight" rating with a target price of $140. Wells Fargo said that Micron recently updated its earnings guidance, expecting a decline in gross margin in the third quarter of fiscal 2025 (the bank expects a decline of 20 basis points to 38.6%, while the consensus is 38.5%). However, Micron remains optimistic about the market outlook, expecting an increase in shipments in the current quarter and maintaining its revenue growth expectations. The report noted that the decline in Micron's gross margin in the third quarter was mainly due to the increase in the proportion of consumer products, the decline in the price of consumer products in the first quarter of 2025, and the overall weak industry environment for NAND. However, the company expects the industry situation to gradually improve after the third quarter as the industry supply adjusts and optimizes the inventory of smartphones and PCs. Micron expects the PC and smartphone markets to achieve low to mid-single-digit growth and reiterates that the demand for DRAM in the data center remains strong. In the high-bandwidth memory (HBM) field, Micron's commercial and technological progress is smooth. The company plans to start mass production of 12-layer stacked HBM products in the second half of 2025 and expects most HBM shipments to be based on 12-layer stacking technology. Micron said its HBM market share target is consistent with its overall DRAM market share, and it expects HBM to bring revenue growth in both this quarter and the next quarter. The "Overweight" rating of Wells Fargo on Micron reflects the company's improved competitiveness in the DRAM and NAND markets, the growth in demand brought by next-generation technologies, and its ability to continuously optimize its product portfolio. Despite the risks of price fluctuations in DRAM and NAND, Micron's strong demand in data centers, 5G smartphones, and PCs drives a positive outlook for the future market. The target price of $140 reflects the long-term support of the expected EPS in fiscal 2026 (about 13 times PE).