Key Takeaways
- Citi reduced Micron’s price target from $1,400 to $1,150 while maintaining a Buy rating
- Memory pricing momentum expected to peak during the second quarter of 2027 before declining
- MU shares decreased over 1.8% on Friday and have fallen approximately 9% in the past month
- SK Hynix revealed $38.15 billion investment plan for new semiconductor fabrication facilities in South Korea
- Chinese manufacturers YMTC and CXMT pose significant long-term competitive threats through capacity expansion
Shares of Micron Technology (MU) declined more than 1.8% during Friday’s trading session, settling near $872, following Citi’s downward revision of its price target and SK Hynix’s announcement of substantial investments in Korean chip production facilities.
The financial institution lowered MU’s price target from $1,400 to $1,150 while preserving its Buy recommendation. Citi adjusted the valuation multiple downward to 8x from 10x based on updated calendar year 2027 earnings projections.
“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 outlook came after Citi’s discussions with memory supply chain stakeholders at the “Future of Memory and Storage” industry conference.
The primary takeaway from these conversations indicated that while DRAM and NAND pricing strength remains genuine, the upward momentum is beginning to weaken.
Citi’s updated forecast anticipates sequential price deceleration for both DRAM and NAND products throughout the next four quarters, reaching maximum pricing levels by the second quarter of 2027.
For the latter half of 2027, Citi forecasts DRAM pricing to decline 3% on a half-over-half basis, revised from their previous flat projection. NAND pricing is anticipated to drop 5% during the same timeframe.
Additionally, the firm decreased its fiscal 2027 and 2028 earnings per share estimates by 1% and 2%, respectively.
Profitability Pressures Mounting
Citi anticipates Micron’s gross profit margins will retreat from their current mid-80s percentage range, stabilizing in the mid-70s range throughout the following year.
Approximately 40% of Micron’s DRAM production operates under long-term contract pricing arrangements, offering some protection, though insufficient to completely counterbalance the anticipated price erosion.
Micron’s stock value has declined approximately 9% over the last 30 days, despite maintaining gains exceeding 660% over the trailing 12-month period.
SK Hynix Capital Deployment Raises Supply Questions
Friday brought news that SK Hynix received board authorization for 54.3 trillion won ($38.15 billion) in additional chip fabrication investments across South Korean facilities.
This announcement follows earlier commitments totaling 800 trillion won ($518.58 billion) from SK Hynix and Samsung combined to establish new semiconductor production complexes this year.
The influx of new production capacity won’t materialize immediately. Major fabrication facilities generally require several years from approval to operation.
Micron’s own $100 billion New York manufacturing initiative, unveiled in 2022, isn’t projected to commence production operations until the 2030 timeframe.
Substantial new memory production capacity isn’t anticipated to materialize until approximately next year, with additional facilities scheduled for 2028 completion.
Samsung reported DRAM average selling price increases of roughly mid-40% quarter-over-quarter during Q2, surpassing analyst expectations. SK Hynix announced DRAM ASP growth of 30% sequentially and revealed a five-year, $500 billion strategic supply agreement with Nvidia.
Sandisk fell short of its September quarter revenue projections due to weaker pricing dynamics, a factor Citi incorporated when adjusting its estimates.
Citi identified Chinese memory capacity expansion as the most significant structural challenge to its investment thesis. YMTC plans to expand production by 50,000 to 60,000 wafer starts to its existing 200,000-unit capacity next year, aiming to achieve global NAND market leadership by 2030.
DRAM manufacturer CXMT plans to expand from 350,000 to approximately 400,000 wafers next year, targeting 600,000-wafer production capacity by decade’s end.
“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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