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Critics often dismiss Micron Technology (MU) as a value investment due to its significant price appreciation. Others cite elevated valuation ratios, P/E, P/S, among others as evidence against its value proposition. A subset of investors further oversimplifies the analysis by fixating on a single ratio at an arbitrary point in time, declaring it "too high" or "too low." Such approaches may explain why stock-picking, on aggregate, underperforms: returns are diluted by methodologies lacking robustness. Setting aside these critiques, I will outline why Micron appears fairly valued (and potentially slightly undervalued) as of this posting.
Micron specializes in two core memory technologies: DRAM and NAND. Within DRAM, high-bandwidth memory (HBM) is critical for AI workloads, though all current and next-generation DRAM variants serve global AI data centers. This market is an oligopoly dominated by Samsung, SK Hynix, and Micron, with Micron being the sole U.S. entity holding strategic market share. Importantly, Micron need not compete for marginal gains: the total addressable market (TAM) is expansive. The company estimates it can fulfill only two-thirds of medium-term memory demand for certain clients, even after securing fully booked contracts through 2026. Technological advancements have revitalized this historically cyclical industry, shifting competitive dynamics. While Micron’s products must meet evolving AI compute standards, supremacy in performance is secondary to supply reliability. The ability to alleviate constraints now drives revenue growth more decisively than technical leadership alone.
This dynamic renders Micron’s valuation unusually transparent for a technology firm, a sector often reliant on speculative projections. Historically (e.g., CY25Q1), the ratio of DRAM to NAND average selling prices (ASPs) stood at 10:1. Current data indicates this ratio has widened to 19:1, with aggregate ASPs tripling. This surge stems from a confluence of factors: CY25Q1 marked a cyclical trough, with bit shipments and ASPs declining 8% and 18% quarter-over-quarter, respectively. Simultaneously, NVIDIA’s Blackwell-architecture GPUs began ramping, and AI model releases (e.g., DeepSeek) accelerated demand. The ensuing recovery has been stronger than prior cycles, and Micron is positioned to capitalize due to its revenue leverage and operational efficiency.
Regarding revenue leverage: Micron exercises precise control over bit shipments and DRAM/NAND mix. As DRAM ASP growth outpaced NAND through late 2025, the company optimized shipments to achieve a 0.22:1 DRAM/NAND mix. Coupled with ASP trends, this yields 42% year-over-year revenue growth. I have distributed this growth across four quarters, adjusting for seasonality.
On operational efficiency: Gross margins expanded from 38% to 56% in 2025, primarily because input costs lagged rising memory ASPs. Assuming this momentum moderates as input costs normalize, gross margins should reach approximately 65% by FY26Q2. This projects $9.85 billion in gross profit. Operating expenses follow a predictable trajectory, reflecting eight quarters of linear growth, resulting in $8.25 billion in operating profit. These figures align with Micron’s historical performance, if modestly optimistic. Applying net interest income estimates and a consolidated tax rate of 12% for FY2026, earnings per share for the current quarter (FY26Q2) are projected at $6.60.
Notably, Micron’s trailing twelve-month P/E ratio has remained stable at 20x since late 2024. Applying this multiple to the sum of the forecasted FY26Q2 EPS and the prior three quarters’ realized EPS yields a fair value of $327 per share for the current quarter (December 2025–February 2026). This suggests Micron is fairly valued—a rarity among AI-exposed equities. Extending the same P/E to FY26Q3 implies a price target of $454.
Obligatory disclaimer:
This analysis is for informational and discussion purposes only. It does not constitute financial, investment, or trading advice. The projections herein are based on assumptions that may not materialize, and market conditions can change rapidly. Past performance is not indicative of future results. Always conduct independent due diligence and consult a qualified financial advisor before making any investment decisions. Investing involves risks, including the potential loss of principal capital. The author holds shares of Micron Technology as of writing this post.