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Micron Poised to Benefit From 'Enhanced' Long-Term Deals, UBS Says

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Micron Poised to Benefit From 'Enhanced' Long-Term Deals, UBS Says

Micron Technology's (MU) valuation should get a further boost from long-term agreements in the memory industry, UBS Securities said Tuesday, as the semiconductor manufacturer's market capitalization crossed the $1 trillion mark for the first time.

The new "enhanced" LTAs include longer durations, fixed volume commitments and partially fixed pricing, compared with the prior periods that involved volume-based offtake deals, according to UBS analysts, including Timothy Arcuri.

These LTAs are likely to cover 20% to 30% of the memory industry's double data rate -- or DDR -- bit shipments in 2027, the brokerage said. Hyperscalers have secured about 60% to 70% of the industry's Server DDR5 volumes under these agreements, it said.

"We believe the market will start to put a more 'normal' multiple on the stock and MU will continue to re-rate higher as more details emerge about the structural changes (artificial intelligence) has driven to the entire memory complex," Arcuri wrote. "These agreements will allow (Micron) to trade some near-term revenue for demand visibility and a smoother earnings profile."

Shares of Micron were trading 21% higher in Tuesday afternoon trade, boosting its market cap above $1 trillion, Yahoo Finance data showed. The stock's valuation has more than tripled so far this year.

UBS boosted its price target on Micron shares to $1,625 from $535, while reiterating its buy recommendation.

UBS raised earnings-per-share estimates for Micron to $155 from $133 for calendar year 2027 and to $167 from $122 for 2028. Micron is expected to generate free cash flow of more than $400 billion from 2027 through 2029, according to the brokerage.

"Considering that investors typically reward stocks for durability and visibility, we see (Micron's) EPS remaining (more than) $100 through (calendar year 2029) as testament to the sort of lasting, structural change that should support a shift toward a broader semi multiple," Arcuri said.

Price: $907.84, Change: $+156.84, Percent Change: +20.88%

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