Wall Street Still Treats Micron Like a Commodity Stock — Analyst Says That's a Costly Mistake

Micron Technology Inc. (NASDAQ:MU) stock rose during Friday’s premarket session as broader market sentiment improved. Nasdaq futures gained 0.89%, while S&P 500 futures climbed 0.44%, signaling a positive start for Wall Street.The gains also come as D.A. Davidson makes a bullish valuation case for Micron. The firm believes artificial intelligence has transformed the role of memory chips and strengthened the company’s long-term growth prospects.Luria Sees a Three-To-Five-Year Growth RunD.A. Davidson Managing Director Gil Luria raised Micron’s 12-month price forecast to $3,000 from $2,100 on Wednesday, arguing that strong AI and memory demand gives the company a path to grow over the next three to five years.Luria told CNBC on Thursday Micron trades at about six times earnings, far below Advanced Micro Devices, Inc. (NASDAQ:AMD) and Intel Corp. (NASDAQ:INTC) at roughly 40 times or more. He described that gap as “one of the biggest dislocations we’ve ever seen.”He also said Micron represents about 3% of the Nasdaq 100 by market capitalization but could generate roughly 10% of the index’s earnings over the next 12 months.Memory Evolves Beyond StorageLuria said investors still view Micron through the lens of its historically cyclical memory business, even though the role of memory has changed significantly.Three years ago, he said, customers primarily used memory for storage. AI has transformed that function because memory now directly affects how AI models operate.“The more memory you put to a model, the better it works. The more memory, the faster the model works. The more memory, the bigger the context window,” Luria said.He argues that this shift makes memory a more essential part of AI infrastructure rather than simply a storage product. See More: Top Value Stocks Longer Contracts Could Reduce CyclicalityLuria expects more than half of Micron’s products to be sold through five-year agreements as Microsoft Corp. (NASDAQ:MSFT), Amazon.com Inc. (NASDAQ:AMZN) and Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL) Google increasingly design specific memory products into their data centers.“The product is no longer a commodity, it’s no longer sold like a commodity,” Luria said.He believes those longer-term arrangements could make Micron’s business more predictable than in previous memory cycles.Buybacks Could Add SupportLuria said Micron can resume share repurchases on Dec. 9, when restrictions on its buyback expire. He noted that management has said it plans to use 100% of excess cash flow for opportunistic share repurchases.Multiple Expansion Drives the $3,000 ForecastLuria said Micron’s stock gains have so far come mainly from earnings growth rather than a higher valuation multiple.He believes investors could eventually value Micron closer to the broader market once they recognize that memory participates in the same AI investment cycle as GPUs and CPUs.“If a company can grow more than the market over a cycle, it deserves at least a market multiple,” Luria said.Price ActionMU Stock Price Activity: Micron Technology shares were trading higher by 2.23% at $1058.98 during premarket trading on Friday, according to Benzinga Pro data.Photo via Shutterstock Read Also: Stock Market Today: S&P 500, Dow Jones Futures Gain as Scott Bessent Says US Is Starving Iran's 'Tyrannical Regime'—PKE, HUM, RENX in Focus