New Street analyst Pierre Ferragu upgraded Micron to Buy and set a $1,250 price target, arguing that AI demand has broken memory chips' old boom-and-bust pattern. The call comes as Micron shares push back toward $1,000, even though a Chinese rival has overtaken it in NAND shipments.
Micron traded around $966 on August 14, extending a snapback that has pushed the shares back near the $1,000 level. New Street's Pierre Ferragu upgraded the stock to Buy from Neutral and raised his price target to $1,250. That implies 32% upside over Thursday's $949.83 close.
Ferragu says the old memory cycle no longer applies
For decades, memory demand rose, prices spiked, then oversupply sent them tumbling, so investors avoided paying high multiples on peak earnings. Ferragu believes AI is breaking that pattern because it changes both the quantity and quality of memory demand.
High-bandwidth memory, unlike commodity DRAM, is not simply more of the same chip — it is a core component of AI accelerators built by Nvidia and other major buyers. New Street estimates AI could eventually account for close to two-thirds of memory demand, with the firm modeling demand growth near 15% a year beyond 2030, versus roughly 10% historically.
Cash generation is the core of the bull case
Ferragu's thesis rests heavily on cash. New Street estimates Micron could hold over $600 billion in cash by 2030 and generate more than $150 billion in annual free cash flow. That figure implies a 14% free cash flow yield against Micron's current market capitalization of nearly $1.1 trillion.
Micron's most recent quarter showed a $30.2 billion cash balance. Ferragu believes Micron could eventually command a $2 trillion to $3 trillion valuation by 2030.
Wall Street consensus still expects a downturn, with EPS projected to fall to as low as $100 in 2028 after reaching $154.89 in 2027, according to estimates compiled by Seeking Alpha. But Ferragu expects Micron to stay highly cash generative even through a four-year slump, which he says shrinks the amplitude of the cycle itself.
Valuation still lags the rally
Micron has tripled this year, outpacing the S&P 500's 14% gain. Even so, the stock remains over 20% below its late-June peak, and China's YMTC has overtaken it in global NAND shipment share.
Micron trades at about 13 times forward non-GAAP earnings, 47% below the sector median, after posting an 84.9% adjusted quarterly gross margin and $18.3 billion of quarterly free cash flow.
Source: TheStreet
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