Micron Technology (MU) is poised to move into new highs in earning power given the shortage in Dynamic Random Access Memory, or DRAM, Morgan Stanley said in a Thursday note that moved the company into "Top Pick" status.

The severity of the shortage is reminiscent of the situation in 2018, Morgan Stanley analysts said, citing their buyer contacts. However, Micron is now facing this cycle with earnings already at record levels, versus before when they began at breakeven. Thus, the stock has yet to fully price in the upcoming upside and the company could reach "uncharted territory" from an earnings standpoint, the analysts said.

Typically, DRAM price strength is short-lived during cyclical upturns, but in the current scenario, there is significantly higher demand growth compared to supply over a sustained period, the analysts said. They said that semiconductor equipment suppliers have reported that DRAM capacity expansion is occurring quickly, with entire fab schedules accelerated.

The analysts said pricing will see a blended average rise of 15% to 20% in Q1 and Q2 of 2026, but could reach 50% or more for customers who were not able to lock in pricing early.

Morgan Stanley maintained the company's stock rating at overweight and boosted the price target to $325 from $220.

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