Micron Technology Inc. (NASDAQ:MU) trades at about 6 times forward earnings, the kind of multiple investors give memory makers they expect to peak soon. D.A. Davidson analyst Gil Luria thinks that’s a mistake. On October 7, he raised his price target to $3,000 from $2,100, which was already a Street-high, and kept a Buy rating. His target uses 19 times fiscal 2027 earnings of about $158 per share, slightly below consensus. So nearly all the upside comes from investors paying a higher multiple. The stock is already up 260% this year. Micron’s rally hasn’t stopped it from making it to our undervalued-stock list. See which other stocks offer potential value in October.
Management’s Own Comments Back Him Up
The reason I find Luria’s view convincing is how closely it lines up with Micron’s own earnings call on September 30. CEO Sanjay Mehrotra said the company has signed 26 long-term customer agreements, covering more than 35% of its revenue through 2030. agreements carry approximately $150 billion in remaining performance obligations, alongside $32 billion in customer financial commitments, mostly consisting of cash deposits. CFO Mark Murphy added that even at the contracts’ minimum prices, Micron expects margins well above any past peak. Mehrotra also said the company can’t yet see when supply will catch up with demand. Its long-term agreements could give its earnings more support than in past cycles. But is the market still treating it like a traditional memory stock? See why Jim Cramer thinks this stock may no longer be the same cyclical bet.
Micron’s Capex Plans Are the Risk to Watch
Micron is spending heavily to keep up. It plans about $25 billion in capital spending in just the first half of fiscal 2027, with even more expected in the second half. Shares slipped after hours following the report as investors weighed those plans.
Analysts seem cautious as well. They expect EPS to climb 133% in fiscal 2027 and 17% in 2028, but then fall about 32% by 2030. The forward non-GAAP P/E of 6.18x sits well below its 5-year average of 74.26x, while the forward Price-to-sales ratio of 4.29x is close to its 4.17x norm. Multiples this low during record revenue quarters show the market is still treating Micron like a typical cyclical memory company. With approximately $68.3 billion more in cash and marketable investments than debt, Micron has considerable financial flexibility to fund its buildout.
Hedge funds were already leaning in. Funds holding Micron rose from 154 in Q1 to 184 in Q2. The value of their stakes more than doubled from $14.3 billion to $34.9 billion.
Management’s comments give Luria’s call real support. If the contracts keep margins high while spending ramps up, I think a 6x multiple will be hard to justify for long.
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