Alex A.C.
Value/GARP Investor, Semiconductor & Financial Analysis, Electronics MEng
Micron's path to buying back about half of its shares by 2029 is extremely bullish. Per UBS, cited by @techfund1, free cash flow of about $155B, $225B and $205B for 2027-2029 lays a path to repurchasing about 30% of the company over two years and potentially about half through 2029. UBS expects the market to reward Micron with a much higher P/E as gross margins likely hold above 65-70% through the cycle. Wall Street price targets should now reflect much higher P/Es. x.com x.com
Micron's long-term agreements should keep margins structurally above past cycles: it expects gross margins under its price-band agreements, even at floor pricing, to be well above its peak quarterly margin of any past cycle, 61.0% in August 2018. Per @carrioresearch, customers have signed about $150 billion of take-or-pay contracts, up from about $5 billion at the end of May, with fixed prices or floors on three-quarters. The test is whether floors hold when new fabs start output in late 2028. 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
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 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 trades at an absurd 4-5x P/E on $200–$220 of annual EPS while Wall Street keeps moving the goalposts. On September 30, CEO Sanjay Mehrotra should report $35–$38 of EPS versus guided $30–$31 and call it a structural boom, yet the market will still ask for the next quarter. Free cash flow at levels none of the Big Five match could fund a buyback of up to 40% of its market cap. x.com
Micron's cash generation puts a rising floor under the stock: it is effectively raising more than $160 of cash per share on a forward basis, about $1 every two trading days. Even on a conservative path of $160, $100, $80, $50 and $40 a year as earnings fall, it would earn $430 of cash per share in five years, against a premarket price of $830. x.com
Micron's move is parabolic and should see a 50% or larger correction over the next few years. The stock has hit its 1.618 Fibonacci extension from the 2000 high at $1,200+, an 18x return in under 18 months and 120x in 10 years, with many speculators chasing it. Much of the rally is earnings driven, but the market is already pricing in future growth, and price can stay irrational for a while. Holders should trim 50-65% or sell in-the-money covered calls out to end-2027 or early 2028. x.com
Micron's approved buyback adds a shareholder-return catalyst to its investment case. WealthyBeaver reports that Micron's board approved $33 billion more in repurchases, lifting the total authorization to $35.16 billion. The plan starts December 9 when CHIPS Act buyback limits end and may use up to all adjusted free cash flow. The announcement had been expected for a while. x.com
Micron's FY2028 earnings could substantially exceed the displayed $206.89 normalized EPS estimate, leaving the shares at about 3x FY2028 EPS. A beat of at least 30-50% depends on demand, pricing, margins and buybacks. 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 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
