Micron Technology (NASDAQ:MU) shares gained more than 4% pre-market today after Stifel analysts upgraded their rating from a Hold to a Buy, lifting the price target from $80 to $120.

The analysts explained the shift by pointing to initial signs of memory prices stabilizing noted in September, driven by reductions in supply. Despite the broader electronics demand not picking up as much as anticipated, industry insights indicate a tightening DRAM supply, expected to improve by mid-year.

With DRAM accounting for a significant portion of Micron's profits (over 80% historically), this tightening is poised to enhance the company's financial leverage. The analysts argued that the consensus forecasts for 2025 significantly undervalue Micron's potential, especially considering its alignment with AI and HBM technologies. Setting a price target of $120, the analysts base this on a conservative forward P/E ratio in the low teens, contrasting sharply with a more optimistic 2025 EPS forecast of $10 against the consensus which is under $7.