Why This Stock Now
Micron Technology just reported the most profitable quarter in its 48-year history, guided the next one higher still, and watched the stock lose ground anyway. That sequence is worth examining, because the resulting valuation is among the most unusual in the semiconductor sector today.
The Business
Micron makes DRAM and NAND flash memory, the chips that store and move data inside servers, phones, and AI accelerators. For most of its history, memory was a commodity business, violent in its cycles and punishing to hold through downturns. That description is becoming harder to apply. AI data centers require enormous quantities of high-bandwidth memory, or HBM, to feed the compute engines running large language models. Micron is one of only three companies on earth that can supply it, and management has said a large part of its 2027 HBM volume is already sold out, with demand outpacing industry supply into 2028.
Why Wall Street Is Paying Attention
The fiscal fourth quarter, reported September 30, produced revenue of $54.23 billion, up 379% from a year earlier and ahead of the $51.33 billion consensus. Adjusted EPS landed at $33.42, beating the $31.61 estimate. Full-year fiscal 2026 revenue reached $133.19 billion, roughly 3.6 times the prior year’s total, with a gross margin of 81.1%, up 40.2 percentage points year over year.
The guidance drew more attention than the results. Management guided Q1 fiscal 2027 revenue to $61.5 billion, 8% above analyst consensus at the time and 13% above Q4’s record. Adjusted EPS guidance of $38.15 cleared the $35.36 consensus by a wide margin. CEO Sanjay Mehrotra said he expects fiscal 2027 to be stronger than 2026. DA Davidson raised its price target to $3,000 on October 7.
Micron has also locked in 26 strategic customer agreements covering more than 35% of estimated revenue through 2030, with $32 billion in customer financial commitments behind those contracts. Memory is increasingly a contracted business, not a spot-priced one. That changes the cycle risk in a meaningful way.
What’s Driving the Opportunity
The HBM total addressable market is expected to exceed $100 billion in calendar 2027 alone. Micron’s share is the smallest of the three HBM suppliers today, which means more room to capture than its dominant rivals. HBM4 shipments are ramping, with more than $1 billion already shipped for one major customer’s platform. New cleanroom capacity does not arrive until late 2028 at the earliest, keeping pricing elevated through that window.
At roughly $1,035 to $1,088 per share this week, the stock trades at approximately 6x forward earnings. The semiconductor industry median forward multiple sits closer to 25x. The 52-week high was $1,255.
What Could Go Wrong
Capex is rising sharply. First-half fiscal 2027 capital spending is guided at approximately $25 billion, with the second half higher. Most of that is construction of cleanroom space, costs that precede usable capacity by two years or more. Rising incentive compensation will also weigh on near-term margins. Short-seller Michael Burry said on September 28 that he replaced his Micron short with put options shortly before the Q4 report. And memory markets have severely punished investors in prior downturns. The bear case is that 87% gross margins reflect peak conditions, not a structural baseline.
The Bottom Line
Micron has delivered five consecutive quarterly revenue records, guided the sixth higher, and secured multi-year contracted demand that was unimaginable three years ago. The stock is cheaper on forward earnings than at any recent point, precisely because investors are discounting mean reversion. If the HBM cycle proves more durable than prior memory cycles, that discount will close quickly. The capex risk is real. So is the opportunity sitting inside a 6x forward multiple on the largest memory producer in the United States.
