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Luke Kawa

Needham hikes price target on Micron by 50% to $300 ahead of earnings on tight memory chip supplies

Needham analyst Quinn Bolton boosted his price target on Micron to $300 from $200 ahead of its Q1 fiscal 2026 results, scheduled to be released on Wednesday.

While there have been numerous media reports that try to pin down who gets what in different prominent AI supply chains, the simple story here is that there’s effectively an oligopoly for dynamic random access memory chips (Micron, Samsung, and SK Hynix), and these companies have pricing power because of limited supply and elevated AI-fueled demand.

“We believe industry supply/demand is far tighter than management expected on its F4Q25 (Aug) earnings call,” Bolton wrote. “We expect industry supply will remain constrained throughout 2026 as Micron, Samsung, and SK Hynix are all constrained by clean room space and can only rely on node transitions to increase bit shipments in the near term.”

In other words, these companies are so capacity-constrained that the only way to sell more memory is to sell better chips as they move to more advanced editions.

“We note management recently confirmed the company’s HBM3E and HBM4 capacity is sold out for CY2026 and believe HBM continues to carry above corporate and DRAM average gross margin,” he wrote.

Bolton also boosted his estimates for full-year sales for Micron’s next two fiscal years by 8% and 14%, respectively, and adjusted earnings per share by 18% and 30%, respectively. Even so, all of these figures remain a little below the consensus estimate.

Wall Street analysts have been scrambling to rightsize their views on Micron ahead of earnings. The average price target has gone up by a whopping 67% over the last three months, and the shares spent the vast majority of time from late October through last week trading above the consensus outlook.

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Helena Cheng

Lululemon’s stretch getting tested: Stock plunges after after outlook is cut

Lululemon shares are down double digits in premarket trading after the company cut its full-year sales and profit outlook, overshadowing a Q1 beat and raising fresh concerns about the brand’s turnaround efforts.

The company now expects fiscal 2026 revenue to be flat to down 1%, compared with its prior forecast for 2% to 4% growth. Guidance for full-year diluted earnings per share was dragged down to a range of $10.95 to $11.15, below the company’s previous guidance of $12.10 to $12.30 and well below Wall Street’s estimate of $13.26.

Key numbers for Q1:

  • EPS of $1.69 vs. the $1.68 expected.

  • Revenue of $2.47 billion vs. the $2.43 billion expected.

The modest top-line beat masked a widening divergence between Lululemon’s geographic markets. While international revenue rose 22% overall with a 30% increase in Mainland China, the bigger problem remains North America, where revenue fell 5%.

Interim co-CEO and CFO Meghan Frank acknowledged during the earnings call that recent product rollouts underperformed. A highly anticipated yoga campaign failed to generate its expected “halo effect” across broader product lines.

Profitability metrics took a major hit, with gross margins contracting by 410 basis points to 54.2% due to mounting tariff costs and promotional markdowns. Operating income consequently fell 37% year over year to $276.9 million.

“We experienced spikes of negative commentary in the media and on social channels with regard to our brand, which had an impact on traffic and overall top-line performance,” Frank said during the earnings call. “And second, not all of our product launches have met our expectations. While we have had several successful launches so far this year, we have seen others as we start Q2 not generate the anticipated guest response.”

Lululemon’s valuation has already been steadily compressing for years. While it was once one of retail’s richly valued stocks, investors have been questioning whether the company can return to the double-digit growth era.

The results also arrive during a leadership transition. Lululemon announced back in April that former Nike executive Heidi O’Neill is set to take over as CEO in September, with investors looking to her to revive growth in North America and restore the brand’s growth.

As Lululemon faces both macroeconomic pressure and brand-specific challenges, its stock has dropped around 40% year to date.

markets
Paige Oamek

US job growth skyrocketed in May, blasting past expectations

The US economy added 172,000 jobs in the month of May, the Bureau of Labor Statistics reported Friday, sending 10-year Treasury yields higher.

The strong May job market surprised economists. Experts had predicted only 85,000 new jobs — just half the reported number. The unemployment rate held steady at 4.3%, as expected.

The job growth story is a hopeful spot for the economy as consumers continue to feel inflationary pressure from the Iran war.

Job gains were buoyed by the leisure and hospitality sector, which added 70,000 jobs, as well as local government, healthcare, and education.

Both the March and April jobs reports were revised upward, making them collectively 93,000 higher than previously reported.

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