Kioxia's Profit Margin Approaches 80%, J.P. Morgan Raises Its Target Price to 155,000 Yen
According to a JP Morgan report, Kioxia's target price has been raised to ¥155,000, following record-breaking Q1 FY2026 results and the announcement of a framework for up to ¥800 billion in share buybacks. The bank's optimism is based on a convergence of data center SSD price increases, rising profitability, and shareholder returns, rather than simply higher NAND shipments.
Kioxia's Q1 results showed revenue of approximately ¥1.77 trillion, up 415.5% year-on-year, with a non-GAAP operating margin of 75.0%. Even stronger, the Q2 guidance forecasts revenue of ~¥2.39 trillion and a non-GAAP operating margin of ~79.5%. This surge is primarily driven by significant ASP growth in enterprise and data center SSDs, fueled by generative AI-related demand, alongside improved product mix and advanced node adoption (e.g., BiCS 8 FLASH).
The ¥155,000 target price is derived from FY2027 EPS estimates and a ~11x P/E multiple, above the historical sector average. This premium reflects reduced selling pressure from Bain Capital and the potential for long-term agreements to stabilize earnings. A key future catalyst is the potential for agentic AI to create new NAND workloads, supporting demand beyond the current cycle.
While the massive share buyback plan signals capital return commitment and helps ease concerns about cyclical overspending, risks remain. The sustainability of SSD price hikes, the actual scale of incremental AI-driven demand, and the industry's ability to maintain capital discipline to avoid a new supply glut by 2027 are critical factors for the stock's continued re-rating.
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