Micron Stock Is Going to a New All-Time High

AI-generated source summary

Micron's stock (MU) is analyzed for its potential to reach new highs, driven by tight supply expectations for memory products extending beyond 2027, particularly for AI-related demand. The current price is around $1030, with a prior high of $1255, suggesting a potential 22% upside. The analysis highlights that HBM memory uses more capacity per bit than DRAM, creating competition for manufacturing resources. Despite the current demand from AI, the overall market for memory products (DRAM and NAND) remains constrained. Multi-year take-or-pay agreements with customers securing supply are a key factor, providing a floor for Micron's pricing and a ceiling for customers. The company's guidance for gross margins at 86% suggests that profitability is supported by this tight supply, not necessarily by further margin expansion. Two scenarios are presented for reaching $1255: one assuming no valuation expansion (requiring annual EPS of $151, or quarterly EPS of $38) and another assuming a higher earnings pace (quarterly EPS of $35, leading to annual EPS of $140, with a valuation multiple of 9x, implying a stock price of $1260). The bullish case relies on sustained tight supply, continued customer commitments, and the potential for earnings to continue growing and exceeding the current guidance. Key indicators to watch for a potential cycle turn include customers cutting orders, weakening memory pricing, and falling profit outlooks. However, the current data points toward continued strength, with Micron investing $27 billion in capital to meet demand and customer commitments securing future revenue. The price level of $1040 is identified as first resistance, with $1255 being the ultimate target.

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