Micron (MU) reported quarterly results that beat on both profit and revenue, yet the stock traded down about 2.3% to 2.5% the next morning, near $1,040 (also cited around $1,030). The shares are up 500% this year, driven mainly by memory price increases and shortages. The peak came in June, after which the stock moved mostly sideways ahead of this report.
The Numbers
Earnings per share came in at $33.42 versus $31.61 expected. Revenue nearly quadrupled from the fourth quarter a year earlier, reaching $54.23 billion against a Wall Street estimate near $51 billion. Data center revenue grew 11x on AI infrastructure demand. DRAM revenue alone grew more than 340% year-over-year to $39.8 billion, about 73% of total sales.
Guidance also beat. Micron (MU) expects revenue around $61.5 billion next quarter and EPS rising to $38.15, both above analyst forecasts.
The CEO said the company is working with Nvidia (NVDA) on "the industry's first custom implementation of HBM," a potential growth factor.
Spending Plans
Capital expenditure is a concern because Micron (MU) plans to raise it. The company is investing $250 billion to build two new campuses for HBM production. It laid the foundation stone for one in January in New York. A new plant in Boise, Idaho is set to open next year.
Capex guidance: $11.5 billion for the first fiscal quarter, about $25 billion for the first half of fiscal year 2027, with second-half spending even higher.
Analyst Reactions
The move down was smaller than the options market had priced, which expected a drop of a little over 7%. Analyst notes flagged only minor issues - some mention of margins, very little margin compression, and concern over capital expenditure, but no serious reservations.
- Goldman Sachs (GS): neutral rating, price target $1,100. Expects moderate upside after results and guidance that beat expectations, despite a gross margin forecast that fell short amid inflated investor expectations. Investors await an update on capex forecasts.
- JPMorgan (JPM): reaffirmed overweight, target $1,540. Praised compelling results and the company's updated view of supply and demand shortages. Says an almost certain reversal toward capital spending is confirmed, with strong earnings growth potential for years.
- Morgan Stanley (MS): Outperform, target $1,200. Over the past three quarters Micron (MU) beat consensus EPS by 20-40%; this quarter it beat by just 5%, with guidance 6% above consensus, which could become the new norm for the company.
- Gabelli Funds: called it another confident beat, with no negative data suggesting a quick reversal of the memory cycle into a downturn.
Analyst notes point to a memory demand cycle that looks resilient and durable.
My View
A great report from a fantastic company, up 500% year-to-date. The easy money here may already be made. Do not expect another 500% return by this time next year; a steady, gradual return is more likely. Strong recent results do not block new highs, but I would not bet on the pace staying as fast as it has been.
The broader market is struggling. Strong economic data means inflation is likely to stay high, and so are interest rates, which keep rising. The market wants that trend to stop. Oil is the wild card. Given all this, Micron (MU) is under market pressure today despite its earnings. Once oil calms and rates stop rising, the market should recover and top names like Micron (MU) will get bought.
I am buying this dip by selling a March call option with a strike of 1400. With the stock near 1030-1040, that leaves over 30% of upside room, and selling the call brings in premium to cushion downside risk.
The semiconductor sector is turning up slightly - the SOX index moved into the green, and Micron (MU) and the broader memory group are moving off their lows, though the trading day is just starting.
