Micron Technology (MU 3.01%) stock has been on a roller-coaster ride in the past year, rising incredibly through the first half of 2024 before losing its wheels and dropping 39% from the 52-week high it achieved in June of last year.
The initial rally in Micron stock at the beginning of 2024 was so strong that its one-year returns still stand at 8.4%, ahead of the 6% gains clocked by the PHLX Semiconductor Sector index during the same period. A big reason why Micron stock dropped sharply in the past year despite logging robust growth in its revenue and earnings is that its guidance tends to be either below or in line with Wall Street's expectations.
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For example, Micron's previous quarterly report, released in December 2024, sent its shares packing as its guidance was way behind consensus expectations on account of slower growth in consumer-focused end markets. However, with memory sales expected to improve substantially in 2025, it is easy to see why Micron stock has jumped nearly 11% already this year.
However, can this memory specialist sustain this momentum in the coming year and head higher? Let's find out.
A favorable memory sales environment should be a tailwind for Micron Technology
The memory market got a big boost last year thanks to artificial intelligence (AI). Graphics processing units (GPU) deployed in AI servers require bigger and faster memory to support AI workloads, leading to robust growth in the demand for high-bandwidth memory (HBM). Market research firm Gartner expects the trend to continue in 2025, forecasting a potential jump of 66% in HBM revenue.
Meanwhile, the overall spending on memory products is forecast to increase by almost 50% this year to $250 billion. The market's growth is expected to be driven by continued spending on AI infrastructure, along with an improvement in smartphone and personal computer (PC) sales. These tailwinds are set to positively impact the memory pricing environment in the second half of 2025, according to Taiwan-based daily newspaper DigiTimes.
A combination of higher shipment volumes along with a stronger pricing scenario should have a positive impact on Micron's margins, leading to outstanding growth in the company's earnings. What's worth noting here is that the chipmaker is already clocking eye-popping revenue and earnings growth on the back of higher memory spending.
Its fiscal 2025 first-quarter revenue increased by a whopping 84% from the year-ago period. The sharp increase in the company's margins on account of favorable demand-supply dynamics in the memory market helped it swing to a profit of $1.79 per share from a loss of $0.95 per share in the year-ago period.
The company will release its fiscal Q2 results on March 20. It is expecting $7.9 billion in revenue and $1.43 per share in adjusted earnings, both of which will be huge improvements from the year-ago period's figures. Moreover, a potential uptick in memory prices, as discussed earlier, along with Micron's prediction that smartphone and PC sales will start picking up momentum in the second half of the year, indicate that the company's performance could improve as the year progresses.
This probably explains why analysts project Micron's earnings to increase by a whopping 430% in the ongoing fiscal year to $6.89 per share, followed by a 62% jump in the next one to $11.21 per share.
How much upside can investors expect?
Micron carries a 12-month price target of $125 as per 38 analysts covering the stock. That would be a 27% jump from current levels. However, we have seen that Micron is on track to clock outstanding growth in the current fiscal year as well as the next one (which will end in August 2026), which could help it outpace analysts' expectations.
Assuming Micron's earnings do increase to $11.21 per share in fiscal 2026 and it trades in line with its five-year average forward earnings multiple of just 12, its stock price could jump to $135. That would translate into a 36% upside from current levels in the next year or so. However, if Micron's eye-popping earnings growth is rewarded by a richer earnings multiple, it could deliver even stronger gains.
Given that this semiconductor stock is trading at just 14 times forward earnings, investors are getting a good deal on Micron Technology right now. So, it may be a good idea to buy Micron while it is still cheap since it seems capable of delivering terrific gains over the next year.
