Micron Technology could more than double from here as investors pay more attention to its long-term agreements, even though the semiconductor stock has already surged massively, according to UBS. The investment bank has a buy rating on the memory name. It raised its price target on shares to $1,625 from $535, implying 116% upside from Friday's close. "In contrast to prior periods where offtake agreements were simply volume based, these new 'enhanced' LTAs now incorporate longer durations, fixed volume commitments and - most importantly - a partially fixed pricing framework," analyst Timothy Arcuri said in a note to clients. "The market will start to put a more 'normal' multiple on the stock and MU will continue to re-rate higher." Those long-term agreements, which usually last between three and five years, have two benefits for memory suppliers like Micron, according to the analyst. For one, the deals offer a "smoother" earnings and revenue profile and higher cross-cycle ROIC, he noted. They also provide investors with "improved visibility into now-committed customer demand," Arcuri said. To be sure, there is also potential for the stock to fall sharply if demand for high bandwidth memory chip falters, Arcuri said. His downside scenario sees the stock falling to $250 — or 66% below Friday's close. UBS' base case falls in line with consensus on Wall Street. Of the 46 analysts covering Micron Technology, 43 have a buy or strong buy on the stock, LSEG data shows. Shares have risen 704% over the past 12 months.
