DRAM supply and demand imbalance may continue until 2028. Deutsche Bank and TD Cowen both raised their target price for Micron Technology (MU.US) to $1500.

On the eve of Micron's (MU.US) third-quarter earnings report on June 24, Deutsche Bank maintained a "buy" rating on the company and significantly raised its target price from $1000 to $1500, an increase of 50%, mainly based on the explosive demand for AI-driven DRAM and favorable pricing. Analysts stated that they have raised their performance expectations for Micron's fiscal third quarter ending in May, to reflect the strengthening industry demand dynamics, as well as the mild positive guidance released by the company last month. In the previous guidance, management pointed out that the company's financial outlook has improved since the last earnings conference call. The analysts' current simulation of May quarter revenue exceeds the upper limit of their performance guidance (estimated by Deutsche Bank Aktiengesellschaft at $35.1 billion), and under the continuous price favorability, there is still room for further upside. Analysts believe that the demand for bits in the future years will significantly exceed the supply growth rate, driven by storage-intensive AI workloads (traditional DRAM and low-power DRAM are becoming core growth engines). Despite the entire DRAM ecosystem announcing new and accelerated capacity expansion plans in the past 180 days, the supply-demand tightness is expected to continue. In this environment of supply-demand tight balance, analysts currently expect Micron's EPS for the calendar year 2027 to reach $160, and in the foreseeable future, its gross margin will remain above 80%. Furthermore, analysts expect the core focus of this earnings conference call to be on the company's previously announced "strategic customer agreements" (SCAs). The market has shown a strong interest in the specific mechanisms supporting these agreements (including post-settlement pricing, customer capital expenditure joint investments, and the possible coverage of Micron's total business by these agreements, among others). Analysts pointed out that although they expect management to reveal some incremental information about these metrics during the conference call, the information disclosed by management may still be limited due to ongoing contract negotiations. Analysts see that Micron's fundamentals continue to remain strong ahead of this earnings release, with the industry's supply-demand imbalance expected to continue (and even possibly intensify) in the second half of 2026, 2027, and even throughout 2028. With such a strong fundamental background, coupled with the boost in financial performance from the new contract arrangements, analysts believe Micron Technology, Inc. has every reason to receive an upward revision in its EPS and undergo a reevaluation in valuation to bring it closer to the valuation multiples of the semiconductor industry. Collective institutional bullish sentiment This week, TD Cowen analyst Krish Sankar also significantly raised Micron's target price from $660 to $1500. He stated that investors are digesting the logic of "DRAM demand uptrend" and "extended pricing power cycle." TD Cowen's adjustment to the $1500 target price is not only based on the judgment of the memory cycle uptrend but also on a structural logic - about the strategic value of memory in the AI era, and when this value will be realized in financial reports. This target price adjustment is based on two core arguments, distinguishing it from traditional memory cycle upgrade reports. First, a revision of the pricing timetable. The institution previously expected a certain degree of digestion period in the first half of the calendar year 2027, but this expectation has now changed. The research report indicates that CPU demand is leading buyers to expect strong pricing power to continue until the second half of the calendar year 2027. Sankar now expects server DRAM prices to peak around the third quarter of the calendar year 2026 - in a typical DRAM cycle, memory stocks often experience extreme prosperity and downturns, with prices fluctuating significantly. Second, the more crucial argument is: TD Cowen explicitly states that the role of memory in AI is structural rather than cyclical. Even considering SOCAMM specification adjustments, the amount of DRAM corresponding to each gigawatt (GW) of power consumption is increasing - indicating that the construction of AI infrastructure will continue to drive memory strength continuously upward, unlike the traditional server cycle where there is mean reversion. The forecasted EPS of $150 for the calendar year 2027 is based on the belief that this structural demand is already embedded in Micron's profitability. Other institutions that have concurrently followed suit include RBC Capital, which raised its target price to $1200, citing the continued upturn in the DRAM cycle for the 12th quarter, with strong pricing and shipments. Aletheia Capital also raised its target price to $1600 and switched to a PE valuation framework based on expected 2027 earnings. Wolfe Research also raised its target price to $1250, anticipating continued upward pricing for DRAM and NAND in 2026-2027.