Micron Technology(US:MU) Zhi Tong Cai Jing·2025-06-23 10:25Core Viewpoint - Micron Technology is expected to report its Q3 earnings on June 25, with Morgan Stanley maintaining a "neutral" rating due to the significant rise in Micron's stock price, while remaining optimistic in the short term due to accelerating AI spending and Micron's increasing involvement in this area [1] Group 1: Earnings Expectations - Morgan Stanley's earnings forecast for Micron's Q4 is 20% higher than market consensus, reflecting an upward adjustment in expectations despite tariff concerns [1][2] - The firm anticipates that Micron's direct AI revenue (LPDDR and HBM) will grow from approximately 14% of sales in February to nearly 30% by November, primarily driven by HBM [3] Group 2: Market Dynamics - The demand for personal computers and smartphones is expected to rebound, with data centers being the core driver of growth, particularly due to strong AI demand [2] - The NAND market is experiencing improved sales, which should help Micron restart wafer production, despite ongoing capacity utilization challenges [4] Group 3: Profitability and Margins - Short-term headwinds affecting gross margins are dissipating, with improvements expected in eSSD sales and pricing [3][4] - The gross margin guidance for Micron's May quarter was disappointing, attributed to a higher proportion of consumer products, but this is expected to become less of a headwind moving forward [3] Group 4: Valuation Insights - Micron's current valuation is not considered cheap, but the emergence of AI revenue is seen as a turning point, with the stock trading below historical highs [5][6] - The firm uses a different valuation method based on cycle averages, applying a 14x P/E ratio to a projected average EPS of $7, reflecting the new opportunities presented by AI [6]