Micron Earnings Loom as Citi and Wells Fargo Adjust Targets
Micron faces key earnings next week. Wolfe Research projects buybacks covering 25% of market cap after CHIPS Act restrictions end.
Key points
- Wolfe Research projects Micron will buy back shares worth 25% of its market cap over two years.
- Citi raised its Micron target to $1,300, while Wells Fargo cut its target to $1,400.
- Micron's CHIPS Act related buyback ban expires in December, unlocking capital return options.
Micron prepares for its earnings report scheduled for next Wednesday. The memory chip maker faces diverging analyst views on its valuation and growth trajectory. This follows a recent market sell-off linked to AI spending concerns.
Wolfe Research highlighted a significant catalyst for investors. The firm expects Micron to generate sufficient free cash flow over the next two years. This capital allows the company to repurchase shares worth 25% of its current market capitalization.
Diverging price targets from major banks
Citi raised its price target for Micron to $1,300 per share. This increase comes from a previous target of $1,150. The bank maintained its buy rating on the stock, signaling continued confidence in the company’s fundamentals.
Wells Fargo took the opposite action regarding its valuation. It lowered its price target to $1,400 from $1,525. Despite the reduction, Wells Fargo also kept its buy rating. Both firms remain bullish on the long-term outlook.
Buyback restrictions set to expire in December
Micron currently observes a two-year moratorium on share buybacks. This restriction is tied to its acceptance of government funding under the CHIPS Act. The ban is scheduled to expire in December of this year.
The expiration of this restriction is a key factor in Wolfe Research’s model. It enables the substantial repurchase program projected by the analysts. This move is seen as a positive alignment with investor theses regarding capital return.
Investor stance ahead of quarterly results
CNBC reported that the Investing Club with Jim Cramer recently bought Micron. This purchase occurred during last week's sell-off driven by AI slowdown debates. The firm does not anticipate additional purchases before the upcoming quarter.
Market conditions remain volatile for tech stocks. The Nasdaq Composite is down about 8% on Wednesday morning. Oil prices are climbing, and bond yields are rising due to strong economic data. These factors create a challenging environment for growth-oriented companies like Micron.
