Key Takeaways
- Citi reduced Micron’s price target from $1,400 to $1,150 while maintaining its Buy recommendation
- Memory pricing expected to reach its peak in the second quarter of 2027 before declining
- MU shares declined over 1.8% Friday, down approximately 9% in the last 30 days
- SK Hynix revealed plans for $38.15 billion investment in South Korean chip fabrication facilities
- Chinese memory manufacturers YMTC and CXMT pose significant long-term competitive threat through capacity expansion
Shares of Micron Technology (MU) tumbled more than 1.8% during Friday’s trading session, hovering near $872, following a significant price target reduction from Citi and news of substantial South Korean semiconductor manufacturing investments from SK Hynix.
The financial institution lowered its MU target from $1,400 down to $1,150, though analysts retained their Buy recommendation. The adjustment reflects a valuation multiple compression from 10x to 8x based on updated 2027 calendar year 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 emerged after Citi’s discussions with supply chain industry participants at the “Future of Memory and Storage” conference.
The central takeaway from these industry conversations indicated that while DRAM and NAND pricing strength remains tangible, the upward momentum is losing steam.
Analysts at Citi currently anticipate sequential quarterly deceleration in both DRAM and NAND pricing over the coming four quarters, with peak prices materializing during the second quarter of 2027.
For the latter half of 2027, the firm forecasts a 3% half-over-half decline in DRAM prices, contrasting with their previous flat projection. NAND pricing is anticipated to fall 5% during the comparable timeframe.
The investment bank also lowered its fiscal 2027 and 2028 earnings per share estimates by 1% and 2%, respectively.
Profitability Metrics Face Headwinds
Citi’s analysis suggests Micron’s gross margin profile will decline from current levels in the mid-80% range, stabilizing around the mid-70% range throughout next year.
Approximately 40% of Micron’s DRAM production operates under long-term pricing contracts, offering partial protection against price volatility, though insufficient to completely neutralize anticipated pricing pressures.
The semiconductor manufacturer’s stock has declined roughly 9% over the trailing 30-day period, although shares remain up more than 660% year-over-year.
Korean Chipmaker’s Investment Raises Supply Questions
SK Hynix announced Friday that its board had greenlit 54.3 trillion won ($38.15 billion) in additional chip fabrication investments across South Korean facilities.
This announcement builds upon a previously disclosed 800 trillion won ($518.58 billion) combined commitment from SK Hynix and Samsung to construct new semiconductor manufacturing complexes earlier this year.
Industry observers note that expanded supply won’t materialize immediately. Large-scale semiconductor fabrication facilities typically require multiple years for construction and ramp-up.
Micron’s own $100 billion New York manufacturing facility, unveiled in 2022, isn’t projected to commence production operations until the decade’s end in 2030.
Substantial new memory manufacturing capacity isn’t anticipated to materialize until approximately next year, with additional capacity expansions scheduled for 2028.
Samsung reported DRAM average selling price increases of roughly mid-40% quarter-over-quarter in Q2, surpassing analyst expectations. SK Hynix disclosed 30% quarter-over-quarter DRAM ASP growth and announced a five-year, $500 billion supply agreement with Nvidia.
Sandisk fell short of its September quarter revenue projections due to softer pricing dynamics, a development Citi incorporated into its revised forecasts.
Citi identified China’s aggressive memory capacity expansion as the most significant structural challenge to its investment thesis. YMTC is planning to increase capacity by 50,000 to 60,000 wafer starts beyond its current 200,000-unit baseline next year, with ambitions to capture the global NAND leadership position by 2030.
DRAM manufacturer CXMT plans to expand from 350,000 to approximately 400,000 wafers next year, targeting 600,000-wafer 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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