Key Takeaways
- Micron Technology’s memory business is experiencing a significant surge, driving its stock price up 85% over the last three months.
- The company’s growth is driven by a shortage of memory chips relative to the demand from data centers.
- Analysts expect the good times to continue, driven by a significant increase in DRAM selling prices.
- The stock appears to be undervalued, trading at around 15 times fiscal 2026 earnings estimates.
- Management expects the limited supply of DRAM to continue next year, signaling that it should deliver more growth in revenue and earnings.
Introduction to Micron Technology’s Success
Micron Technology, a leading supplier of memory chips, is currently experiencing a significant surge in its memory business. This surge has driven its stock price up 85% over the last three months, making it an attractive opportunity for investors. The company’s memory chips, including dynamic random access memory (DRAM), are used in a variety of devices such as computers, phones, and data centers. As a commodity product, DRAM is highly competitive, but Micron’s recent growth suggests that the company may be able to drive sustainable revenue growth over the long term.
Data Center Demand and Memory Prices
The primary driver of Micron’s growth is the increasing demand for memory chips from data centers. As more companies shift their operations to the cloud, the demand for data center infrastructure, including memory chips, has skyrocketed. This increased demand, combined with a shortage of memory chips, has driven prices up, resulting in higher revenue and earnings for Micron. The company’s fiscal 2025 revenue jumped 49%, with analysts expecting this growth to continue into the next fiscal year. The significant increase in DRAM selling prices has also juiced margins, sending adjusted earnings per share to $8.29 in fiscal 2025.
Evaluating Micron’s Stock
Despite the company’s impressive growth, evaluating Micron’s stock can be challenging due to the historical fluctuations in demand and supply in the memory chip market. The stock appears to be undervalued, trading at around 15 times fiscal 2026 earnings estimates, which is historically a fair valuation for Micron. However, this valuation is sensitive to changes in DRAM prices and competition in the market. As such, investors should be cautious and carefully consider these factors before making an investment decision. Management’s expectations for the limited supply of DRAM to continue next year suggest that the company should deliver more growth in revenue and earnings, making the stock a solid buy as long as these conditions persist.
Long-Term Prospects
Micron’s long-term prospects are closely tied to the demand for memory chips from data centers. As the shift to the cloud continues, the demand for data center infrastructure is likely to remain strong, driving growth in the memory chip market. However, the company must also navigate the challenges of competition and fluctuations in DRAM prices. If Micron can successfully manage these challenges, the company is well-positioned to deliver sustainable revenue growth over the long term. With the stock currently trading at a relatively low valuation, investors may want to consider taking a closer look at Micron Technology as a potential investment opportunity.
Conclusion
In conclusion, Micron Technology’s memory business is experiencing a significant surge, driven by a shortage of memory chips relative to the demand from data centers. The company’s growth is expected to continue, driven by a significant increase in DRAM selling prices. While evaluating Micron’s stock can be challenging due to the historical fluctuations in demand and supply in the memory chip market, the stock appears to be undervalued, trading at around 15 times fiscal 2026 earnings estimates. As long as the conditions of limited supply and strong demand persist, the stock remains a solid buy, making Micron Technology an attractive investment opportunity for investors.
