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Baird analysts have revisited their research coverage of the semiconductor industry on Monday amid recent developments. The most notable move includes the rating upgrade for Micron (NASDAQ:) stock from Neutral to Outperform. Baird is saying it sees a strong upside opportunity for the largest memory chipmaker in the US, especially after the recent pullback. "While catching the train a bit late, we see meaningful upside opportunities ahead for Micron notably given the stock's recent pullback, in discrepancy with incrementally positive trends unfolding in DRAM per our recent channel checks, yielding to a somewhat unprecedented outlook for memory over the next 12-18 months," Baird analysts wrote. The investment firm noted that DRAM prices are outperforming recent channel expectations, while industry-wide supply growth is projected to slow to low single-digit percentages quarter-over-quarter in the second half of 2024, partly due to capacity shifts to HBM. For 8GB DDR4 DIMMs, contract prices are expected to rise by 23% in Q2, 8% in Q3, and 5% in Q4. Spot prices are predicted to jump from a mid-single-digit percentage increase in Q2 to a low-teen percentage increase in Q4, signaling positive trends for 2025 contract prices, analysts said. Meanwhile, 8GB DDR5 DIMM prices are projected to rise by 12% in Q2, 8% in Q3, and 5% in Q4. The mix of DDR5 production is also improving, with DDR5 now accounting for over 50% of Micron's output. Customers are expanding DDR5 inventories, keeping the technology's price premium at 15% over DDR4 for the next few quarters. 3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure or
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. Regarding HBM, the analysts see a new supercycle forming with substantial gross margin potential for Micron, reminiscent of the early days of the NAND ramp, which achieved over 60% annual bit growth. "Micron has the potential to generate 60%+ gross margin on its HBM3E production, with migration from 8H to 12H later this calendar year increasing yields. Micron has the potential to gain a high single-digit market share in HBM exiting C2024," Baird analysts wrote. "HBM3E could represent 20% of Micron's total DRAM revenue by end of C2025 (high single digit in bits), with 150% growth expected next year, representing a significant mix improvement opportunity as HBM3 pricing is 6x that of DRAM," they continued. Amidst this optimism, MU is now included in Baird's list of top semiconductor stocks, joining Nvidia (NASDAQ:), Broadcom (NASDAQ:), and Semtech Corp . (NASDAQ:). The firm's new price target on the stock is $150, implying a 30% upside from the last closing price.
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