Micron Technology could more than double in the coming years as investors focus more on the company’s long-term contracts, even though semiconductor stocks have already risen significantly, UBS said. The investment bank has a buy rating on Memory Name. The company raised its price target to $1,625 from $535, implying a 116% upside from Friday’s closing price. “In contrast to previous periods when offtake agreements were simply volume-based, these new ‘enhanced’ LTAs incorporate longer terms, fixed volume commitments and, most importantly, partially fixed pricing frameworks,” analyst Timothy Arcuri said in a client note. “As the market begins to set more ‘normal’ multiples for the stock, MU will continue to be revalued higher.” Analysts say these long-term contracts, which typically last three to five years, have two benefits for memory suppliers like Micron. As an example, he noted that the deal offers a “smoother” revenue and revenue profile, as well as a higher cross-cycle ROIC. They also provide investors with “improved visibility into currently committed customer demand,” Arcuri said. Indeed, if demand for high-bandwidth memory chips slumps, the stock could plummet, Arcuri said. His downside scenario would see the stock fall to $250, or 66% below Friday’s closing price. UBS’s base case is consistent with Wall Street consensus. According to LSEG data, 43 out of 46 analysts covering Micron Technology rate the stock as a buy or strong buy. The stock has increased 704% in the past 12 months.
