Micron Stock Declines on Margin Warning, Top Analysts Keep Strong Buy Ratings

Micron Technology (MU) saw its stock decline by 2.6% on Wednesday after CFO Mark Murphy warned of a decrease in gross margins for the fiscal third quarter of 2025. Despite the weak margin outlook, top-rated analysts have remained optimistic about the company’s long-term prospects, reiterating their Buy ratings on the stock.

Weak Q3 Margin Outlook

Micron’s CFO, Mark Murphy, announced that the company expects “a few hundred basis points” sequential decline in gross margins for Q3 Fiscal 2025, which ends on May 31.

• This warning caused concerns among investors, leading to a 2.6% drop in Micron’s stock price.
• Despite the warning, Murphy reaffirmed the previously issued guidance for fiscal Q2, projecting adjusted earnings per share between $1.33 and $1.53, with revenue ranging from $7.7 billion to $8.1 billion.

Factors Behind Margin Decline

Murphy attributed the lower margins to two main factors:

1. Shift Towards Lower-Margin Consumer Segments: Micron is experiencing a shift in its product mix, with a greater focus on lower-margin consumer markets.
2. Pricing Pressures in the NAND Memory Market: There has been increased pricing pressure in the NAND memory segment, which has impacted margins.

However, Murphy emphasized that Q3 will likely represent the lowest point for margins and that a recovery is expected in the second half of 2025.

Expected Margin Recovery

Murphy remains confident that margins will improve later in the year.

• He expects higher data center demand and an improvement in smartphone inventory levels to support the recovery.
• Additionally, a reduction in NAND memory supply could help stabilize prices, which would improve Micron’s profitability in the second half of 2025.

Analyst Optimism for Micron’s Future Growth

Despite the current challenges, two top analysts, Christopher Danely from Citigroup and Srini Pajjuri from Raymond James, remain confident in Micron’s long-term potential.

• Christopher Danely: He maintained his Buy rating and set a price target of $150 for Micron stock, implying a 63.6% upside from the current price.
• Srini Pajjuri: He also maintained a Buy rating with a price target of $120, suggesting a 30.9% upside.
• Both analysts are optimistic about Micron’s future growth, driven in part by the potential of AI-driven high bandwidth memory (HBM) solutions. Additionally, Danely expects a recovery in the DRAM market to further boost Micron’s performance.

What Is the Price Target for MU?

Micron’s stock has a Strong Buy consensus rating on Wall Street, based on 21 Buy ratings and 2 Hold ratings in the last three months.

• The average price target for Micron is $136.10, which implies a 48.45% upside from its current level.
• Micron has gained 9% year-to-date, showing resilience despite short-term margin pressures.

Important Highlights

• Q3 Outlook: Micron’s CFO warned of a sequential decline in gross margins for Q3, but expects a recovery in the second half of 2025.
• Q2 Guidance: Micron reaffirmed its fiscal Q2 earnings guidance, with projected earnings per share between $1.33 and $1.53 and revenue between $7.7 billion and $8.1 billion.
• Analyst Sentiment: Top analysts from Citigroup and Raymond James have reaffirmed Buy ratings, with price targets of $150 and $120, respectively.
• Recovery Drivers: Analysts expect margin growth driven by AI-driven memory solutions and a recovery in the DRAM market.
• Stock Rating: Micron holds a Strong Buy consensus with an average price target of $136.10, suggesting significant upside potential.