Micron Earnings: Management Guides for a Cyclical Recovery and We Maintain Our Forecast

We maintain our $70 fair value estimate for shares of no-moat Micron Technology after the firm’s fiscal fourth-quarter results and fiscal first-quarter guidance exceeded our expectations. We maintain our model for fiscal 2024 and longer term but now see an earlier and less back-end-weighted recovery through fiscal 2024. Micron management believes recoveries for the DRAM and NAND markets are underway. While we’ve seen bit shipments for both technologies improve from February-quarter bottoms, management believes pricing has bottomed in the August quarter and is set to rebound. In our view, a cyclical recovery for memory chips should be bolstered by the emerging high spending toward artificial intelligence-focused data centers, which offer a content uplift to suppliers like Micron. We see shares as fairly valued and view a modest selloff afterhours as myopic considering a fiscal first-quarter outlook that while weak, represents a meaningful improvement.