Micron Stock Has Lost Over 40% Since Its June Record. I’d Still Buy It.

Shares of memory chipmaker Micron Technology (MU -17.46%) dropped 7% on Nov. 4, ending at $795.23, and kept falling on Nov. 5. At around $690 as I write, the stock sits over 40% under the $1,213.56 it finished at on June 25, its all-time closing high.

Stocks linked to artificial intelligence data centers slid broadly on Nov. 4 after Democrats’ midterm election wins, as traders prepared for a slower build-out, according to CNBC.

When I called Micron stock a buy last week, shares had just ended at $884.74. They’ve since fallen over 20%. But Micron’s latest outlook, issued with its results on Sept. 30, hasn’t changed. That means investors can now buy the same expected earnings for less.

And I think these earnings still show a company making more money every quarter — with a stock priced as if that’s about to stop.

Image source: Micron.

Earnings still rising

Micron’s fiscal 2026 ended on Sept. 3, and most of its profit came late in the year. Showing how fast the memory shortage boosted results, Micron’s earnings per share under generally accepted accounting principles (GAAP) went from $4.60 in fiscal Q1 to $12.07, $24.67 and $32.87 in the next three quarters. For the full year, GAAP earnings per share were $74.33, up from $7.59 in fiscal 2025. Revenue in fiscal Q4 alone hit $54.2 billion, up 379% year over year.

The climb hasn’t stopped, but it’s getting less steep. For the current quarter (the first quarter of fiscal 2027), management forecast GAAP earnings per share of $37.84, plus or minus $1. That would be around 15% over fiscal Q4, after a 33% gain the quarter before — and more than eight times the $4.60 Micron earned in the same quarter a year earlier.

In other words, Micron expects to earn around half of fiscal 2026’s per-share total in this one quarter.

Management also expects revenue to climb from the previous quarter in every quarter of fiscal 2027, with higher gross margins after this quarter.

Much of Micron’s supply is already sold

The Nov. 4 sell-off centered on data centers, and they’re Micron’s largest market. Two of its four business units, core data center and cloud memory, pulled in $34.3 billion of fiscal Q4’s revenue, or around 63% of the total.

Limits on new data centers have also gained ground in some states. In April, Maine’s legislature passed a temporary statewide freeze on new large data centers. It would have been the first of its kind in the U.S., but the governor vetoed it.

Yes, a slower build-out might eat into demand. But a big part of Micron’s sales is already spoken for. The business has signed 26 strategic customer agreements, which are multiyear take-or-pay deals (customers owe for the volumes they agreed to, even if they don’t take them). Its remaining performance obligations, or the contracted sales it hasn’t recognized yet from deals with set pricing terms, counted at minimum prices, totaled around $150 billion.

“[E]ven at floor prices, we expect margins meaningfully above any prior cycle peak margins,” chief financial officer Mark Murphy said in prepared remarks for the Sept. 30 earnings call.

That means management thinks the contracts can shield profits even if prices fall to the bottom of the agreed ranges.

Sure, the deals don’t cover it all. Micron estimates the agreements make up over 35% of its revenue through 2030, which leaves most of its sales linked to market prices.

Is Micron stock a buy after the drop?

At around $690, Micron trades at under 10 times earnings, based on the $74.33 per share it earned in fiscal 2026. At $884.74, it traded at around 12 times the same earnings.

MU – Micron Technology

$656.39-$138.84 (-17.46%)

NASDAQ · As of 4:00 PM ET 11/05/26

For a business expecting to earn about half as much in one quarter, investors at that price-to-earnings ratio are arguably pricing in a big fall in profits when the shortage ends.

It could happen. Memory makers tend to add supply when prices are high, and Micron does too. It expects to spend around $25 billion on capital expenditures in just the first half of fiscal 2027 — near the $27.4 billion it spent in all of fiscal 2026.

But management also says it doesn’t yet have “line of sight to when supply and demand will return to balance.” And at under 10 times earnings, the stock already allows for a sharp drop in profits.

So, I’d still buy Micron stock at this price. I’d just space my purchases out over the months ahead rather than buy all at once. A stock that lost 7% in one day on worries about a slower data center build-out might do it again.

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