Micron Stock Soars Again: Here’s Why Investors Can’t Get Enough
Another day, another surge—Micron's rally defies gravity while analysts scramble to justify valuations.
Chip demand or hype cycle?
Memory markets are boiling, but whispers of 'this time it's different' sound awfully familiar to anyone who survived the last semiconductor bubble.
Wall Street's selective memory
When Micron beats estimates, it's 'structural demand.' When it misses? Just temporary inventory adjustments—until the next guidance cut.
Bonus jab: Nothing fuels a rally like short-covering and FOMO—the financial equivalent of rocket fuel... and eventual hangovers.
Image source: Getty Images.
What's Micron earning in Q4?
Previously, Micron had told investors it WOULD collect $10.7 billion in Q4 revenue, plus or minus $300 million -- so $11 billion max. Now, the company says it will beat that number, aiming for $11.2 billion, and potentially as much as $11.3 billion, and certainly more than $11 billion.
Gross profit margins earned are also inching higher, with 43.5% the target instead of a previous guess of 41%. As a result, Micron is boosting its bottom-line forecast.
Instead of $2.14 to $2.44, management says the company could earn from $2.57 to $2.71 per share. That's an extra $0.35 per share in profit.
Management -- understandably -- tooted its own horn a bit, crediting "improved pricing, particularly in DRAM" for the extra earnings it expects to make, but also "strong execution."
Is Micron stock a buy now?
Once analysts get around to adding the extra $0.35 to their forecasts, it should raise consensus estimates to $8.17 for this year's Micron earnings per share. On a $122 share price, that works out to a P/E ratio of about 15 -- not a very high multiple for a stock that's now expecting to grow full-year earnings 600% year over year!
All this said, Micron hasn't yet stated what its free cash FLOW for the year might be, and right now, it's FCF that's Micron's Achilles' heel (it's running about one-third of reported net income). Speaking personally, I'm going to wait and see that number before deciding to change my mind and declare Micron stock a buy.
