Micron Technology: Q4 Earnings Strengthen the Thesis but Supports a Buy
RATING BUY | PRICE $1,086.40 | TARGET $1,345 | EXPECTED RETURN +23.8% |
Summary
I downgrade Micron Technology (NASDAQ: MU) from Strong Buy to Buy. The business is stronger, but the stock at $1,086.40 intraday on October 1 already sits 20.1% above the previous article's $904.28 purchase price, reducing the margin of safety.
Micron reported fiscal Q4 revenue of $54.23Bn, adjusted gross margin of 87.0%, adjusted EPS of $33.42 and adjusted free cash flow of $33.20Bn. Revenue and EPS beat FactSet consensus by 5.6% and 5.4%, respectively.
The core thesis strengthened. AI data center demand, HBM pricing, data center SSD growth and supply discipline all improved, while 26 Strategic Customer Agreements now represent more than 35% of estimated revenue through 2030.
My base case forecasts FY2027 revenue of $265Bn and adjusted EPS of $163.30. Applying 9x earnings and discounting the resulting August 2027 value back at 10% gives a present target of $1,345.
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