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Micron Trades at 6 Times Next Year's Earnings. The $38 Billion of Capacity That Ends This Cycle Doesn't Open Until 2028.
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Key Points:
- Micron Technology's stock trades near $879, with a trailing P/E of about 20 but only 6 times expected earnings for the next year, reflecting rapid earnings growth driven by strong demand.
- In fiscal Q3 2026, Micron's revenue more than quadrupled year-over-year to $41.5 billion, with gross margins rising to 84.6% and operating cash flow increasing over fivefold, driven primarily by data center demand.
- SK Hynix announced a $38 billion investment in two new memory fabs scheduled to begin production in late 2028 and 2029, indicating that significant new supply will not alleviate current tight market conditions until then.
- Micron has secured 16 take-or-pay strategic customer agreements covering up to half its revenue through 2030, providing revenue stability with price floors that protect against downturns.
- Despite the inevitable memory cycle downturn, current fab construction timelines and contract structures suggest Micron's strong financial performance and elevated earnings could persist longer than the market currently prices in.
