HSBC Raises Micron Price Target to $500 on 45% DRAM ASP Jump
HSBC raised Micron’s price target to $500 from $350 and expects Q2 operating profit of $12 billion (up 88% QoQ) on $20 billion sales (+47%), driven by a 45% QoQ rise in DRAM ASPs. It forecasts fiscal 2026 operating profit of $51 billion (+368% YoY) on revenue of $84 billion (+124%).
1. Record Q1 FY2026 Performance Fuels Confidence
Micron reported an all-time high first quarter of fiscal 2026 revenue of $13.6 billion, a 57% year-over-year increase driven by surging demand for high-bandwidth memory (HBM) in AI data centers. Gross margin expanded to 45.5%, up 8.2 percentage points from a year earlier, and adjusted operating cash flow reached $8.4 billion, up from $5.7 billion in Q1 FY2025. Management stated that product shipments are sold out through 2026, reflecting order backlog from strategic customers and underpinning visibility for continued growth.
2. Strategic Partnerships Cement AI Memory Leadership
As one of the three leading global HBM suppliers, Micron has secured long-term supply agreements with major AI chip makers—including Nvidia, Advanced Micro Devices and Intel—positioning the company at the heart of the AI memory bottleneck. To focus resources on enterprise and data-center memory, the company has announced the wind-down of its Crucial consumer RAM business, with shipments ceasing next month. Sumit Sadana, Micron’s Chief Business Officer, highlighted that this strategic shift will optimize capacity allocation towards higher-margin AI workloads.
3. Valuation and Analyst Upgrades Highlight Upside
Despite a 39% share price increase year-to-date, Micron trades at approximately 12x forward earnings, a level below its historical multiple and well below peers in the AI infrastructure space. HSBC recently raised its price target from $350 to $500, citing a faster-than-expected rally in DRAM prices and forecasted a 45% quarter-over-quarter increase in blended DRAM ASPs for Q2 FY2026. The firm projects fiscal Q2 operating profit of $12 billion (up 88% sequentially) on sales of $20 billion (up 47%), and expects 2026 annual operating profit of $51 billion, a 368% year-over-year gain on revenue of $84 billion, up 124%.
4. Bullish Outlook Supported by Capacity Expansion Plans
Micron plans to increase capital expenditures by 7% starting in H2 FY2027 to expand DRAM production capacity, aiming to address the persistent memory supply tightness. With lean industry inventories of two to four weeks and accelerating inferencing workloads consuming server DRAM, the supply–demand imbalance is expected to persist through year-end and into 2027. The anticipated capacity build-out, coupled with higher dividend payout ratio targeted at 6%, underscores management’s commitment to delivering sustained earnings growth and shareholder returns.