3 Reasons Micron Stock Could Keep Climbing From Here

It can be hard to please the market, as Micron Technology (MU +4.25%) is finding out. True, the stock has gained 218% this year, but it has declined 27% since hitting a new all-time high in June, despite the semiconductor specialist’s fantastic financial results. However, my view is that this recent dip represents a wonderful opportunity for long-term investors to purchase the company’s shares, as there are good reasons to believe that there is plenty more upside ahead. Let’s discuss three of those reasons.

Image source: The Motley Fool.

1. Micron’s results are excellent

Micron is firing on all cylinders. In the fourth quarter of its fiscal year 2026, which ended Sept. 3, the company’s revenue of $54.23 billion increased by 379% year over year and by almost 31% sequentially. The company’s data storage chips are flying off the proverbial shelves like hotcakes, and the significant demand for its products is giving it stronger pricing power. That’s showing up in the company’s margins.

Consider that Micron’s gross profit for the period grew significantly faster than revenue, reaching $47 billion, up almost 831% compared to the year-ago period. Micron’s GAAP gross margin was 86.8%, almost twice the 44.7% reported in the prior year-quarter. Micron’s net income increased even faster, reaching $37.7 billion, up 1077.8%. Micron’s core data center business unit accounted for 33% of revenue during the period, compared to just 14% in the fourth quarter of its previous fiscal year.

This helps highlight the massive impact of the artificial intelligence (AI) tailwind on the company. What’s more, Micron’s guidance implies that the party isn’t about to stop. The company expects revenue of $61.5 billion (at the midpoint) for the first quarter of its fiscal year 2027, representing an increase of about 351% year over year. Other important metrics, including gross margins and earnings per share, should also grow at a good clip, based on Micron’s projections.

MU – Micron Technology

$968.24+$39.48 (+4.25%)

NASDAQ · As of 2:05 PM ET 10/28/26

2. The memory bottleneck could persist several more years

One of the most important reasons Micron is generating outstanding financial results is the shortage of memory chips. Since these chips are indispensable to AI infrastructure, hyperscalers have no choice but to pay a premium to secure them if they want to continue scaling their data centers. But how much longer will this shortage last? It’s hard to say, but according to some estimates, it may not ease until 2029. Here is why. As demand surges, Micron and other companies in this niche are prioritizing AI-focused products, as they are the most profitable right now.

However, this is causing shortages elsewhere in the memory chip market. Micron and other leaders in the field will have to increase their capacity to meet demand across the industry, but doing so could take several years; until then, the shortage may persist. At worst, it could continue beyond 2030. Of course, these predictions may not be accurate. But the evidence at least suggests that Micron has a couple more years of incredible demand for its products and significant pricing power.

3. Micron’s valuation looks reasonable

Even if the shortage persists, Micron’s revenue and earnings growth rates will eventually decrease. They always do. But in my view, that’s already somewhat baked into the company’s share price. Consider that Micron’s current forward price-to-earnings (P/E) ratio is 5.05. Let’s assume Micron’s forward P/E stays essentially unchanged over the next five years, while the company’s earnings per share (EPS) compounds at an average of 12% through this period — then the company will register a cumulative return of about 76% over this period, or 12% annually, which is pretty strong.

There are certain risks that are reflected in Micron’s low forward P/E, notably the cyclicality of the semiconductor industry. However, Micron is also likely to maintain EPS growth that’s much stronger than our assumption, at least over the next few years. Even if it decreases significantly after that, the assumed average through 2031 looks fairly reasonable, in my view. So, the stock could deliver attractive returns over the medium term, making it a buy today.

Source: www.fool.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.