Bill Brooklyn
Capital Preservation, Asymmetric Risk/Reward, Holding Winners
Micron's management keeps telling the market what is coming in AI memory, and the market keeps dismissing it until it happens. In 2025 Micron expanded HBM3e and DRAM capacity and locked in hyperscaler contracts while skeptics called memory commoditized; a year later Micron was up 240% and Sandisk 591%. Now it is committing billions to HBM4 fabs, signing LTAs with NVIDIA and AMD and signaling exploding inference demand, while skeptics call HBM overhyped. CEO Sanjay is the leading indicator. x.com
Micron may merit 10x next year's earnings, perhaps a $2,000 share-price target rather than D.A. Davidson's $3,000, on the firm's case that AI and memory demand could support three to five years of growth. x.com
Micron can't meet customer demand, giving it rare visibility at a valuation of about 5x next year's earnings. CEO Sanjay Mehrotra said customers are extending agreements into 2031, which gives certainty of demand and lets Micron plan capacity investments with confidence. The stock is now about $1,000, and with potential EPS beats over the next few quarters its forward P/E could be around 5, unthinkable about six months ago. x.com x.com
Micron looks expensive on price-to-book at about 8x versus a historical average of about 2x, and relying on forward P/E for such a cyclical business can be dangerous. x.com
Micron's revenue grew faster than its stock over the past year, leaving it cheaper on trailing earnings. Quarterly revenue rose from $11.3B to $54.2B, while the stock rose from about $198 to $878 and trailing P/E fell from roughly 24x to 11.6x. x.com
Micron looks like a bargain at about 5x forward earnings with 380% sales growth and net profit up 11x, in an AI compute environment where every data point is extremely bullish. A quoted post cites OpenAI nearing $70B in ARR, AI agents becoming a new secular demand driver, record Korean memory-chip exports, and Micron's big beat-and-raise with demand extending another year. x.com
If Micron has only two years of decent forecasts, its limited visibility warrants a lower multiple, not a higher one. x.com
Micron's AI memory-chip sales and accelerating growth support its upside case. Its 3.3/5 WATCH rating reflects a business with 60% of sales from cloud and data-center chips, 64 cents of profit per sales dollar and 256% sales growth last year. At the Oct. 15 close of $878.84, it traded about 42% below estimated fair value of $1,512.34. The case needs strong sales growth and expanding margins and cash flow; slower growth or a price outrunning the business are warning signs. x.com
Micron deserves 10-12x forward earnings rather than 6.2x, and its latest quarter only strengthened the bull case. Revenue reached $54.23B, up 379% year over year, and EPS $33.42, up 1,003%; next-quarter guidance is $62B revenue and $38.15 EPS versus estimates of $58B and $35.92. The market fears growth and demand could suddenly stop, but no one can time when or if that happens, whether in 1, 2, 3 or 5 years. It might not deserve 20x. x.com
Micron fell after hours despite a huge fundamental forecast, which shows everything is priced in for now. x.com
Micron's sold-out high-bandwidth memory through 2027+ and contracts already being signed for 2029-2030+ extend its earnings runway. At 5x forward earnings, it is cheaper than a year ago; its private Anthropic stake is about to be instantly rerated at Anthropic's IPO, and a new share buyback is expected to be announced Dec. 9. Micron could certainly gain 30% in three months. x.com x.com