"Not time to sell, but time to buy"...UBS bets on Micron (MU) to rise despite sharp drop

▲ Micron (MU), Artificial Intelligence (AI), Semiconductors, Bear Market, Short Selling/AI Generated Image

Micron Technology (MU) stock has fallen by about 10% in five trading days. However, UBS made a bold move, calling it a buying opportunity. The firm presented a target price of $1,625, along with a forecast that the AI-driven memory shortage could continue until Q2 2028.

According to Barron's, a U.S. economic media outlet, on July 6 (local time), Micron and memory semiconductor company stocks soared for several months recently before undergoing a correction last week. Micron's stock fell by about 10% over the past five trading days but rose 3.3% to $1,007.26 in Monday's pre-market. Its 12-month gain reached approximately 700%.

UBS analyst Nicolas Gaudois stated that the recent decline is “likely temporary” and maintained Micron's target price of $1,625. Gaudois said, “Fundamentals remain strong, and the memory industry is expected to generate approximately $1.2 trillion in free cash flow (FCF) by 2027,” adding, “Ultimately, this will lead to increased shareholder returns.”

Rising memory prices also supported UBS's bullish outlook. UBS expects Double Data Rate (DDR) memory prices to rise by an additional 32% in Q3 this year compared to the previous quarter, followed by another 18% increase in Q4. This analysis suggests that supply is not keeping pace with the accelerating demand for memory driven by the proliferation of AI hardware.

Gaudois predicted, “The supply shortage in the Dynamic Random Access Memory (DRAM) industry is expected to continue until at least Q2 2028.” He analyzed, “The bit demand growth rate in 2027 will reach 36.2% year-over-year, but supply growth will only be 19.3%, making the gap too large to resolve until Q2 2028.”

The key variable surrounding Micron is the clash between a short-term stock price correction and the long-term outlook for memory supply shortages. UBS evaluated the recent sell-off as a temporary correction rather than a fundamental impairment, citing AI memory demand, price increases, and supply shortages as reasons for its bullish outlook.

[Key Article Summary]

-Micron's stock fell by about 10% over the past five trading days, but UBS maintained its target price of $1,625, viewing it as a buying opportunity.

-UBS expects DDR memory prices to rise by an additional 32% in Q3 and 18% in Q4.

-The DRAM bit demand growth rate in 2027 is projected to be 36.2%, while supply growth is 19.3%, with the supply shortage expected to continue until at least Q2 2028.

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