Micron Pullback an 'Enhanced Buying Opportunity,' Bank of America Says

Bank of America reiterated its Buy rating and a $1,550 price target on Micron Technology (MU) on Tuesday, telling investors that the semiconductor firm's recent stock pullback represents an "enhanced buying opportunity." The bank's analyst, Vivek Arya, argued that while a normalization in memory prices is inevitable, the market's recent sentiment does not reflect the company's currently improving fundamentals.

Analyst's Thesis

According to the BofA note, investors appear to be positioning for an eventual cyclical downturn rather than reacting to the present market conditions. Arya acknowledged that new manufacturing capacity, expected to come online between mid-2027 and 2028, will eventually cause memory prices and margins to normalize.

However, the firm believes the current fundamentals for the memory sector are still improving. BofA cited strong underlying demand signals, such as GPU rental rates remaining near all-time highs and a lack of indication from major hyperscalers that memory supply is constraining AI deployments, suggesting continued pricing power for memory producers.

Focus on Earnings Power

Central to Bank of America's bullish case is Micron's long-term earnings potential. The firm's model projects Micron could achieve an earnings per share (EPS) of about $150 in fiscal 2028. Even in a potential bear-case scenario where DRAM and NAND prices fall in line with historical downturns, BofA estimates EPS could hold near $100.

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This forecast stands in stark contrast to the company's prior cyclical peak of approximately $12 per share in 2018. The bank stated that the stock's current valuation of roughly 8 to 9 times its bear-case earnings assigns little value to the growth potential of Micron's High-Bandwidth Memory (HBM) and broader AI-related businesses.

Market and Competitive Landscape

Bank of America also highlighted several factors that could mitigate future volatility. The firm expects that broadening long-term agreements will eventually cover 50% to 70% of Micron's capacity, which should help reduce price swings even if it cannot entirely prevent a downturn.

Furthermore, the note dismissed China's CXMT as a significant near-term competitor in the high-end memory market. BofA argued that CXMT primarily serves the commodity DRAM market and is "not a threat in AI," where specialized HBM is critical.