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

Deutsche Bank initiated coverage on Micron Technology (MU) with a Buy rating and a $150 price target, citing optimism driven by robust demand for High Bandwidth Memory (HBM) and an improving cyclical backdrop for memory chips. The bank projects HBM revenues to surge from near zero in 2023 to approximately 23% of total sales by 2026, with significantly higher gross margins exceeding 60%, which is expected to drive DRAM revenue and profitability above historical levels. While traditional DRAM also shows continued strength, the outlook for NAND is less favorable. Despite MU's 48% year-to-date rally, Deutsche Bank sees attractive upside, noting the stock trades at approximately 9x 2026 earnings and basing its price target on 11x CY26E EPS of $14.00.

Analysis

Deutsche Bank has initiated coverage on Micron Technology (MU) with a 'Buy' rating and a $150 price target, signaling strong conviction in the memory chipmaker's prospects. The core of the bullish thesis rests on the secular growth driven by High Bandwidth Memory (HBM) demand for AI applications. The bank projects HBM will grow from a negligible revenue contributor in 2023 to approximately 23% of total sales by 2026, carrying significantly higher gross margins of over 60% compared to the ~35% for conventional DRAM. This margin accretion is expected to drive Micron's overall profitability above historical levels. The traditional DRAM segment, accounting for about 75% of revenue, is also viewed favorably, with expectations of continued bit growth and average selling price (ASP) expansion due to favorable supply-demand dynamics. In contrast, the outlook for the NAND business, which makes up the remaining 25% of revenue, is more subdued due to fewer growth drivers. Despite a 48% year-to-date stock appreciation, Deutsche Bank argues for further upside, noting the stock trades at approximately 9x its 2026 earnings estimate. The $150 price target is derived from applying an 11x multiple, in line with the company's 5-year median, to a calendar year 2026 EPS estimate of $14.00.

Key Decisions for Investors

• Given the strong Buy rating and significant projected earnings growth from high-margin HBM, investors could consider the stock attractive for a long position, as the analysis suggests substantial upside potential even after its recent rally.
• Investors should closely monitor Micron's execution on its HBM ramp-up and market share gains, as this is the primary catalyst underpinning the bank's bullish thesis and higher profitability forecasts.
• While the outlook is positive, the valuation is based on 2026 earnings estimates, so investors should consider the execution risk and also track the performance of the weaker NAND segment, which could temper overall results.