Shares of Micron Technology (MU) kept surging after the chipmaker posted its biggest one-day gain in more than a decade.
The stock rose 3.6% on May 27, extending a massive rally after shares jumped 19.3% the previous day. Micron has now climbed roughly 77% over the past month, while the stock is up 225% this year and 863% over the past 12 months.
The rally has been fueled by Wall Street’s growing confidence that artificial intelligence demand is reshaping the memory chip industry, especially for high-bandwidth memory, or HBM, used in AI servers and data centers.
Micron recently crossed another milestone, with its market value topping $1 trillion for the first time, joining a small group of S&P 500 companies with trillion-dollar valuations. The only non-technology company in that club is Berkshire Hathaway.
Micron will have a more “normal” valuation
Despite the stock’s massive run, some analysts still believe Micron’s rally is far from over.
On May 26, UBS raised its price target on Micron to $1,625 from $535 while maintaining a buy rating, The Fly reported.
The firm said Micron stands to benefit from long-term memory supply agreements that could improve pricing visibility and stabilize earnings over the next several years as AI demand continues to accelerate.
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“We believe the market will start to put a more ‘normal’ multiple on the stock and MU will continue to re-rate higher as more details emerge about the structural changes AI has driven to the entire memory complex,” UBS analysts wrote in a note to investors.
David Miller, chief investment officer and portfolio manager at Catalyst Funds, said in a MarketWatch interview that Micron is still trading at less than 10 times forward earnings estimates, even after the rally.
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“It’s interesting that even after such a strong move, it could still potentially be viewed as a value opportunity,” Miller said.
He added that Micron remains one of the clearest long-term ways to invest in the AI memory buildout because demand is still far ahead of supply.
“The company can’t nearly supply the backlog of orders,” Miller said.
In March, Micron reported fiscal second-quarter results that well-surpassed Wall Street estimates. The company posted adjusted earnings of $12.20 a share on revenue of $23.86 billion, compared with analysts’ expectations for $9.31 a share and $20.07 billion in revenue, according to CNBC. Revenue nearly tripled from $8.05 billion a year earlier.
Micron also issued a much stronger-than-expected forecast for the current quarter. The company expects revenue of about $33.5 billion and adjusted earnings of roughly $19.15 a share, far above Wall Street estimates for $24.3 billion in revenue and earnings of $12.05 a share.
Analyst who called Micron rally says stock could climb higher
Ed Ponsi, managing director at Barchetta Capital Management and president of FXEducator, said demand for Micron’s memory products continues to overwhelm supply.
“Orders for Micron’s high-bandwidth memory, which enables multiple terabytes per second throughput, far outstrip the available supply,” Ponsi wrote in a TheStreet Pro note. “That supply is expected to remain tight into next year, and possibly into 2028.”
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Ponsi first recommended Micron stock when shares traded around $127, when many Wall Street analysts were skeptical of the company’s earnings outlook.
According to Ponsi, Micron may have intentionally kept expectations conservative at that time, making it easier for the company to outperform future forecasts as AI demand accelerated.
He also pointed to the broader market backdrop supporting technology stocks. Both the S&P 500 and the tech-heavy Nasdaq-100 recently hit record highs despite ongoing concerns around inflation, geopolitical tensions, and slowing job growth.
From a technical perspective, Ponsi said Micron’s relative strength index, or RSI, suggests that the stock is overbought.
Overbought usually indicates a stock has risen quickly and may be due for a pullback. However, he added that “what is surprising is that the overbought reading isn’t extreme, measuring just below 75 on a scale of 0 to 100.”
Still, after such a massive run, Ponsi said he is considering taking partial profits.
“I’m tempted to lock in gains on Micron, perhaps by closing one-third of the position,” he wrote.
But for now, he said the stock remains one of the strongest momentum plays in the market. “We’re going to continue to hold our full Micron position for now.”
Ponsi has a price target for Micron shares of $1,150. The stock closed at $928.41 on May 27.
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