Prediction: Micron Stock Will Skyrocket After Sept. 30
Key Points
The stock looks dirt cheap, but for a good reason.
The memory chip shortage crisis is far from over.
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Micron (NASDAQ: MU) is set to report fourth-quarter earnings on Sept. 30, and it could be a huge day for the stock. Investors are going to be most curious about the health of the memory chip market and whether Micron can keep hiking its prices due to a supply shortage.
Based on previous language from management, it will be some time before the memory chip crisis is alleviated, leaving Micron in a perfect spot to benefit from the shortage. I think this creates the perfect storm for the stock, and it could skyrocket after it reports earnings on Sept. 30. As a result, the best time to get into the stock is right now.
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Micron looks cheap heading into earnings
As mentioned above, Micron is a memory chip producer and is benefiting from the soaring price of its product. The AI hyperscalers are primarily to thank for this, as the data center build-out has consumed all available memory chip capacity and then some. In Q3's results, Micron's management team noted that it doesn't see the supply shortage easing until after 2027, leaving plenty of time for companies like Micron to make a small fortune from rising prices.
Micron also isn't sitting idle while prices soar; it's actively building new production facilities, but these don't go up overnight, and it will be late 2027 to 2028 before many of these are online and running at full capacity. What the memory chip market will do when supply increases is unknown, as Micron's and its peers' new production facilities may only provide enough capacity to alleviate part of the demand, while AI hyperscalers actually need more. It's also possible that the new supply infuses too much supply and carves the memory chip market back to normal levels. This unknown is part of why the market is pricing Micron at such a low price.
MU PE Ratio (Forward) data by YCharts
At just 6 times forward earnings, Micron's stock appears incredibly cheap, and it is. This stems from the uncertainty about what will happen over the next year and a half. However, at this price, the market is clearly taking one of the most negative stances possible. The reality is often somewhere in between the bear and bull cases, and I think that leaves plenty of room for the stock to rise.
A catalyst like Micron's earnings could kick-start this run, and I'd be surprised if Micron reports anything but spectacular results, as that's what it's done over the past few quarters. I think that makes the stock a buy now, and investors may be kicking themselves for not buying pre-earnings.
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Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.
