Micron’s Rally Looks Overdone Until You Price The Memory Shortage

Micron Technology (MU) stock has returned 552% over the past twelve months. At near $1,070 a share, has the price run ahead of the business? On the last twelve months of adjusted earnings, meaning normalized net income with stock-based compensation added back, Micron trades at about 23.5 times. That number looks backward, and memory prices have moved too fast for it to show what Micron earns today.

But Micron Is Already Selling At Shortage Prices

Analysts expect enough earnings in fiscal 2027 to put today’s price at about 6.8 times. On what they expect for 2028, the same price is about 6.2 times. Those forecasts rest on the revenue Micron is guiding to. For fiscal Q4 2026, which has ended but is not yet reported, management guided revenue to about $50 billion, more than half the $90.27 billion Micron sold over the trailing twelve months.

Price, more than volume, has driven Micron’s revenue gains. In fiscal Q3 2026, DRAM prices rose in the low 60s percentage range from the prior quarter, while DRAM bit shipments grew in the low single digits. Gross margin reached a company record of 84.9%, more than double a year earlier. AI is driving the demand, and Micron’s data center revenue topped $25 billion in that quarter.

So Can Micron Keep Its Margins This High?

The forecasts assume it largely can. Consensus has revenue growing about 66.5% a year from the trailing twelve months to 2028, with earnings growing faster still. Between fiscal 2027 and 2028, though, analysts have earnings growing more slowly than revenue, so they already build in some margin give-back.

Management guided fiscal Q4 2026 gross margin up again to about 86%, but said that outlook reflects a meaningful slowdown in the rate of price increases. Everything else hinges on the shortage lasting. Management expects DRAM and NAND markets to stay tight beyond calendar 2027, because new supply depends on greenfield fab projects that are large, complex, and slow to build.

What Would Protect Micron’s Margins If Prices Cool?

Micron’s customer contracts help, but they cut both ways. Micron has signed 16 strategic customer agreements, mostly five-year take-or-pay contracts. Management says the contracts’ floor prices would still keep gross margin well above its peaks in any past cycle. But the largest generally cap prices for existing products at calendar Q2 2026 market levels.

The signed deals cover roughly 20% of Micron’s DRAM volume and a third of its NAND volume over that term. Management expects fixed-price or capped deals to reach about 40% of revenue once all planned agreements are signed.

Analysts’ estimates for 2028 earnings range from $120.92 to $263.28 a share, and the high is more than twice the low. The fiscal 2028 earnings that make Micron look cheapest overlap 2028, the year management expects industry supply to improve gradually. Micron cannot yet say when supply will catch up with demand. So the cheapest multiple, on fiscal 2028 forecasts, depends on memory staying short into 2028.

So Is Micron Cheap, Or Only Cheap While Memory Stays Short?

Neither forward multiple settles that. You would need a view on memory prices, on new fabs, and on how much output the contracts lock up.

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