Micron Growth Is Surging And The Stock Looks Dirt Cheap. …

Accessibility Help About Us

▲ S&P 500 +—%|▲ Stock Advisor +—%Join The Motley Fool

Micron Technology Stock Quote

NASDAQ: MU

Micron Technology

Premium Feature

Moneyball Superscore

91/100

Today’s Change

(-2.05%) $-22.50

Current Price

$1,074.89

Key Data Points

Market Cap

$1.2TMarket cap calculated using publicly traded s outstanding only. Does not include unlisted, private, or dual-class non-traded s. Implied market cap may vary.

Day’s Range

$1072.01 – $1108.00

52wk Range

$179.61 – $1255.00

Volume

27.3M

Avg Vol

33.8M

Gross Margin

85.86%

Dividend Yield

0.05%

Huge growth continues

As one of the three big memory manufacturers, Micron has been benefiting from soaring DRAM (dynamic random-access memory) and NAND (flash) memory prices, both of which are supply constrained due to the AI infrastructure build-out. In fiscal Q4, 73% of Micron’s revenue came from DRAM, with the remainder mainly from NAND.

The DRAM market is being driven by huge demand for high-bandwidth memory (HBM), which gets packaged with AI chips, such as graphics processing units (GPUs). HBM has become an essential component in the AI data center build-out. Without it, GPUs would sit idle, waiting for data to arrive, and systems would ly overheat.

Of the big three DRAM makers, Micron holds the smallest market and derives the least amount of its memory revenue from HBM. However, this has actually benefited the company, as conventional DRAM and NAND price increases have outpaced those of higher-priced HBM. That said, in fiscal Q4, Micron said its HBM revenue growth surpassed its total revenue growth, and it expects HBM shipments to grow faster than DRAM through 2028. It has sold out nearly all its HBM supply for calendar 2027 with a significant price increase, which it indicated will close the gross margin gap with ordinary DRAM.

Moving forward, Micron expects DRAM and NAND to remain supply constrained in both 2027 and 2028. This is despite NAND industry shipments growing in the mid-20% range and DRAM shipments increasing in the low-20% range. It sees no line of sight to when DRAM supply and demand will become balanced.

Micron has 26 long-term agreements in place, representing $32 billion. It estimates these agreements will cover 35% of its revenue through 2030. It also noted that it has a few agreements that go beyond 2030. With increased visibility, it plans to spend $25 billion in capital expenditure (capex) in the first half of this fiscal year to increase capacity, with second-half capex even higher.

Micron logo.

Image source: The Motley Fool

Turning to its results, Micron reported that its revenue increased from $11.3 billion to $54.2 billion, easily surpassing the $51.1 billion consensus, as compiled by LSEG.

By segment, cloud memory revenue soared more than 3.5 times to $16.3 billion, while core data center revenue surged from $1.6 billion in the year-earlier period to $18 billion. Mobile revenue climbed from $3.8 billion to $13.1 billion, while automotive and embedded revenue jumped from $1.4 billion to $6.8 billion. Gross margin expanded to 86.8%, up from just 44.7% a year ago, and was up from 84.6% in fiscal Q3.

Adjusted earnings per (EPS) came in at $25.11 compared to $3.03 a year ago. That was ahead of the $31.61 in adjusted EPS that analysts expected.

Looking ahead, Micron guided for fiscal Q1 revenue of around $61.5 billion with gross margins of approximately 86.25%. The company is looking for adjusted EPS of about $38.15 at the midpoint. That was well above the consensus for adjusted EPS of $35.40 and revenue of $57 billion.

Is Micron stock a buy?

With a forward price-to-earnings (P/E) ratio of 6.5 times fiscal 2027 analyst estimates, Micron’s stock looks dirt cheap. The company is seeing spectacular growth, but the question is where earnings will normalize, given that the memory market has historically seen very large boom-and-bust cycles.

Despite its growing HBM business, Micron is still the memory maker most exposed to a drop in conventional DRAM prices, and the balancing of the market would hit its earnings power hard. That is why I’d pass on the stock and prefer rival SK Hynix, which is the HBM market leader and gets the highest percentage of its revenue from next-generation memory.