Micron Technology (MU) Capacity Expansion Helps Justify 91% Upside, Needham & Company

Needham & Company analyst Rajvindra Gill reiterated a Buy rating and $130.00 price target on Micron Technology (NASDAQ: MU) after the company announced that it plans to spend a combined $150B on Global Manufacturing and R&D over the next 10 years, which raised questions of potential over-capacity issues and whether a plan like this would be a large drag on free cash flow. However, the rationale is due to increasing demand for DRAM and NAND from secular growth drivers such as 5G and AI in data centers, intelligent edge platforms, automotive and user device applications.

The analyst stated "Using data from SEMI to estimate Micron's wafer capacity and incremental capacity per historical CapEx, we estimate that Micron's capacity would rise at a CAGR of 2.1% over the next 10 years, which we believe should not be a cause for alarm of over-supply, given that demand for DRAM and NAND is robust thanks to secular drivers such as 5G and the proliferation of AI. The recent push for domestic semiconductor production could result in subsidies, which would further reduce the burden on Micron's free cash flow."

For an analyst ratings summary and ratings history on Micron Technology click here. For more ratings news on Micron Technology click here.

Shares of Micron Technology closed at $67.51 yesterday.

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