Micron: Deutsche Bank bullish as current levels still offer ’attractive upside’

Investing.com -- Deutsche Bank initiated coverage of Micron Technology (NASDAQ: MU) shares with a Buy rating and $150 per share price target in a note Thursday.

Analysts at the bank are optimistic on both the cyclical and secular backdrop for the memory chipmaker, driven largely by rising demand for High Bandwidth (NASDAQ: BAND) Memory (HBM).

“We are constructive on both the cyclical and secular setup facing Micron,” Deutsche Bank wrote. “We believe High Bandwidth Memory (HBM) is an underrated driver of gen/gen AI processor performance improvements and believe growth in HBM bits and ASPs should drive DRAM revenue growth (~75% of MU revenues) and profitability above historical levels.”

Deutsche Bank estimates that HBM revenues will rise from virtually zero in calendar 2023 to approximately 23% of total sales by 2026.

Profit margins on those HBM products are also expected to be significantly higher, with gross margins estimated at over 60% compared to around 35% for non-HBM DRAM.

On the traditional DRAM side, Deutsche Bank analysts see continued strength driven by higher content per device and improving supply-demand dynamics.

“We see a path to continued bit growth and ASP expansion in non-HBM DRAM in the coming years,” the note said.

NAND, which accounts for the remaining 25% of Micron’s revenue, is less of a driver. Deutsche Bank was more cautious here, saying it sees “fewer content-per-application growth drivers than we do in DRAM” and a less favorable market backdrop.

Despite a 48% year-to-date rally in MU shares, the firm sees room to run.

“We view current levels as still offering attractive upside,” analysts wrote, adding that the stock trades at just ~9x 2026 earnings. “We base our $150 P/T on ~11x our CY26E EPS of $14.00, in-line with the company’s 5-year median P/E multiple.”

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