Micron (MU) Stock Drops Following Citi’s Price Target Reduction Amid Memory Market Concerns

Key Takeaways

• Citi reduced Micron’s price target from $1,400 to $1,150 while maintaining a Buy rating
• Memory pricing for DRAM and NAND is projected to reach its peak during the second quarter of 2027 before declining
• Micron shares declined over 1.8% on Friday, contributing to a roughly 9% decline over the last 30 days
• SK Hynix revealed plans for $38.15 billion in fresh chip manufacturing investments across South Korea
• Chinese manufacturers YMTC and CXMT are ramping up memory production capacity, presenting the most significant long-term threat

Shares of Micron Technology (MU) experienced a decline exceeding 1.8% during Friday’s trading session, hovering near $872, following Citi’s decision to reduce its price target and SK Hynix’s announcement of substantial new investments in South Korean semiconductor production facilities.

Micron Technology, Inc., MU

Citi analysts lowered their price target for MU from $1,400 down to $1,150, though they maintained their Buy recommendation. The adjustment reflects a reduced valuation multiple from 10x to 8x based on updated earnings projections for calendar year 2027.

“We trim MU TP to $1,150 from $1,400 based on 8x P/E vs prior 10x times revised C27 EPS to reflect lower market multiples on mixed memory peer results,” the Citi analyst wrote.

The revised target emerged after Citi’s discussions with memory supply chain industry players at the “Future of Memory and Storage” conference.

Key insights from these industry meetings indicated that while pricing strength in DRAM and NAND markets remains tangible, the momentum is beginning to wane.

According to Citi’s latest forecast, both DRAM and NAND pricing will experience sequential deceleration across the upcoming four quarters, reaching their zenith during the second quarter of 2027.

For the latter half of 2027, Citi anticipates DRAM pricing will drop 3% on a half-over-half basis compared to their earlier flat projection. NAND pricing is expected to decline 5% during that timeframe.

Additionally, the firm adjusted its earnings per share estimates for fiscal years 2027 and 2028, reducing them by 1% and 2% respectively.

Profit Margins Face Compression

Citi analysts forecast that Micron’s gross profit margins will retreat from their current mid-80% range, stabilizing in the mid-70% territory throughout the following year.

Approximately 40% of Micron’s DRAM sales volume operates under long-term pricing contracts, offering some protection, though insufficient to completely neutralize the anticipated price erosion.

Micron’s stock has experienced approximately 9% depreciation over the preceding month, despite maintaining gains exceeding 660% across the past twelve months.

SK Hynix Expansion Heightens Supply Pressure

Friday brought news that SK Hynix received board approval for 54.3 trillion won ($38.15 billion) in additional chip fabrication capital investments within South Korea.

This announcement comes after SK Hynix and Samsung collectively pledged 800 trillion won ($518.58 billion) earlier this year toward establishing new semiconductor production complexes.

However, additional supply won’t materialize immediately. Major fabrication facilities typically require multiple years for completion.

Micron’s own $100 billion New York manufacturing initiative, unveiled in 2022, isn’t scheduled to commence production operations until the 2030 timeframe.

No substantial new memory manufacturing capacity is anticipated to become operational until approximately next year, with additional capacity expansion planned for 2028.

Samsung reported DRAM average selling price increases of roughly mid-40% quarter-over-quarter during Q2, surpassing analyst expectations. SK Hynix disclosed DRAM ASP growth of 30% quarter-over-quarter while announcing a five-year, $500 billion supply agreement with Nvidia.

Sandisk fell short of its September quarter revenue projections due to softer pricing dynamics, a factor Citi incorporated when revising its forecasts.

Citi identified China’s memory capacity expansion as the most significant structural challenge to their investment thesis. YMTC intends to supplement its current 200,000-unit capacity with 50,000 to 60,000 additional wafer starts next year, pursuing the global leadership position in NAND production by 2030.

DRAM manufacturer CXMT plans to expand from 350,000 to approximately 400,000 wafers next year, targeting 600,000 wafers by 2030.

“While US government is unlikely to allow made in China memory sales to US, sales to data centers in other regions like Europe could indirectly impact Micron,” Citi analysts wrote.

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