Micron Technology Faces Double Downgrade, Shares Decline
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Micron Technology Stock Experiences Drop Following Downgrade
Micron Technology (NASDAQ: MU) faced a notable decline in its stock price recently, dropping over 4% following a damaging double downgrade from Exane BNP Paribas.
Reason Behind the Downgrade
The investment firm revised its rating on Micron from Outperform to Underperform. Their analysis indicates significant concerns regarding the excess capacity of High Bandwidth Memory (HBM), which is expected to adversely affect conventional DRAM pricing.
Implications of Pricing Changes
The rating adjustment includes a drastic cut to Micron's price target, which was adjusted from $140 down to $67. This new target reflects a stark change in the anticipated short-term performance for the company.
Concerns on Future Performance
Exane BNP Paribas expressed concerns over downside risks, articulating that while some investors are aware of the near-term risks, they predict that Micron's performance will trail behind its AI counterparts through 2025.
Market Expectations and Price Fluctuations
The bank also noted an accelerated correction in the DRAM market due to oversupply in HBM products. This oversupply may contribute to an overarching downturn in DRAM pricing.
Future HBM Capacity Projections
Exane BNP anticipates that by the end of 2025, HBM production will exceed demand significantly. They forecast that HBM capacity could reach approximately 400,000 wafer starts per month, far surpassing the expected demand of around 168,000 wafer starts per month.
Broader Industry Concerns
Concerns about the ongoing memory cycle contributed to Exane's cautious approach. Their analysis suggests that the current upcycle in DRAM prices may peak as early as the November quarter. Despite a considerable 41% drop from its peak, the firm warns of further risk even with their newly set target of $67 per share.
Contrasting Market Sentiment
Interestingly, Exane's negative outlook for Micron stands in stark contrast to the broader analyst consensus, which remains mostly bullish on the stock. Currently, there are 39 buy ratings and only 2 holds documented in the market.
Future Rating Downgrades
In light of these developments, Exane projects that ongoing rating downgrades and reductions in earnings estimates could increasingly pressure Micron's stock price in the near term.
Frequently Asked Questions
What caused Micron Technology's stock to drop recently?
The decline was primarily due to a downgrade by Exane BNP Paribas, which lowered its rating from Outperform to Underperform amidst concerns about excess High Bandwidth Memory capacity affecting DRAM pricing.
How has the price target for Micron changed?
The price target for Micron was reduced from $140 to $67, reflecting a significant shift in expectations regarding the company's short-term performance.
What are the forecasts for the High Bandwidth Memory market?
Exane BNP Paribas forecasts that by the end of 2025, HBM capacity will exceed demand, which may lead to decreased pricing across the market.
How does this downgrade affect investor sentiment?
This downgrade has increased concerns among investors, suggesting potential further declines in Micron's stock value in the near term.
What is the general analyst sentiment regarding Micron Technology?
Despite Exane's pessimistic outlook, the broader analyst consensus is largely bullish with numerous buy ratings still reported.
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