Red-hot chip stock Micron rises as Wall Street gushes over cloud computing memory demand

Key Points
  • Analysts are optimistic over Micron's end markets and memory chip pricing for the rest of the year.
  • The company's cloud computing memory chip sales surged by 33 percent quarter over quarter in its May fiscal quarter.
Sanjay Mehrotra, CEO, Micron Technology
Scott Mlyn | CNBC

Wall Street is buzzing over Micron's surging profit growth and its better-than-expected sales forecast.

Micron shares rose 4 percent at one point in early trading Thursday, a day after it reported better-than-expected fiscal third-quarter earnings and gave a fourth-quarter revenue guidance above consensus expectations. The stock closed up nearly 1 percent on Thursday.

J.P. Morgan reiterated its overweight rating on Micron shares, citing strong memory chip demand from the cloud computing market.

"Micron continues benefiting from strong cloud data center demand with cloud DRAM revenues up 33% Q/Q," analyst Harlan Sur said in a note to clients Thursday. "In terms of the industry environment, we expect broader memory fundamentals to remain constructive into next year led by continued demand strength in data center."

Micron's stock is one of the best-performing names in the market. Its shares are up 43.4 percent so far this year through Wednesday versus the S&P 500's 3.5 percent return.

Sur raised his price target for Micron shares to $84 from $82, representing 42.5 percent upside to Wednesday's close.

In similar fashion, Stifel believes Micron will gain market share for its chips selling to cloud computing customers.

"Cloud spending continued to be a tailwind for the company," analyst Kevin Cassidy said in a note to clients Wednesday. "Management believes that improved execution has allowed the company to improve its Cloud market share which previously lagged its competitors."

Cassidy reaffirmed his buy rating on Micron shares and increased his price target to $108 from $106.

One Wall Street analyst also predicted Micron will benefit from better-than-expected memory chip prices later this year.

"We continue to see DRAM and NAND spot pricing relatively stable as we move through the JunQ and into 2H18, which would be much better than initial fears," Mizuho analyst Vijay Rakesh said in a note to clients Wednesday.

Rakesh reiterated his buy rating on Micron shares and also raised his price target to $72 from $70.