Key Takeaways
- Micron posted $54.23 billion in quarterly revenue, beating the roughly $51 billion Wall Street expected, yet the stock fell after the report.
- Micron’s long-term DRAM contracts rose from 16 to 26 in about a month, and Cramer argues that ends the company’s boom-and-bust cycle.
- At 6.2 times forward earnings, the stock is still priced like a cyclical company, which looks too cheap if the contracts hold.
Micron Technology (MU) just reported a quarter that Jim Cramer called “phenomenal,” and the stock fell anyway.
Cramer laid out the beat on Thursday’s episode of Mad Money: “Micron did $54.23 billion in revenue when Wall Street expected just a little more than $51 billion.” Earnings came in at $33.42 a share, against the $31.61 analysts expected.
Shares still dropped after the report on Wednesday night and opened lower on Thursday.
Cramer’s answer to the selling was a contract count: “Micron had 16 long term contracts to provide DRAMs. Now it’s 26.”
His conclusion? The end of Micron’s relentless boom-and-bust cycle “has arrived at last.”
That’s a big claim about a company whose stock has always moved with the memory cycle.
Why customers want to lock in
Micron makes memory chips. Its main product is DRAM, the working memory inside computers, phones and servers. It also makes high-bandwidth memory, or HBM, which is stacked DRAM that sits next to AI chips in data centers.
Cramer called HBM demand “insane.” (I’d agree.) The chips are scarce enough that customers have been signing strategic agreements to buy from Micron over the next few years, so they don’t get shut out if the shortage lasts.
(Which, so far it’s looking like it will. I mean, Amazon is hiking GPU rental prices again next week!)
A decade of booms and busts
The reflex to start selling when things look rosiest makes sense once you see Micron’s history. Revenue climbed to $30.4 billion in fiscal 2018 and slid to $21.4 billion by fiscal 2020. It peaked again at $30.8 billion in fiscal 2022, then roughly halved to $15.5 billion in fiscal 2023…
…before reaching $133 billion in fiscal 2026. That’s two full busts in ten years, and the second one cut sales in half in a single year.
Gross margin tells the same story, with bigger swings:
It fell from 45.2% in fiscal 2022 to 2.7% in fiscal 2023, when Micron was barely selling its chips for more than they cost to make. In fiscal 2026 it was 80.7%. That’s the record of a business that lives and dies by prices it doesn’t control.
That’s what the contracts are meant to fix. Cramer said every new one makes Micron “less cyclical and more secular.”
Here’s the thing: the stock is still priced for a bust
The market isn’t convinced yet. Micron trades at 6.2 times its next 12 months of earnings, according to TIKR. A 6.2x multiple is what investors pay when they expect earnings to fall hard.
And historically speaking, long-term deals haven’t provided a ton of protection. Memory makers have signed long-term deals near past peaks, and those contracts tend to get renegotiated once supply catches up. Investors are asking the same question about rival SK Hynix (SKHY), whose long-term deals TIKR looked at on Oct. 2.
Is the boom-and-bust cycle gone? Not entirely. Going from 16 contracts to 26 in about a month is still the strongest evidence yet that the cycle may finally break, but it’s hard to ignore the market’s increasing pessimism.
Normally this is the moment I’d check for share buybacks – if management thinks the company is too cheap, they’ll initiate a buyback (as NVIDIA recently did). Unfortunately, that’s not an option for Micron since they participated in the CHIPS Act – no buybacks until early December.
Until then, keep an eye on rental rates – they’ll be a bit of a canary in the coalmine.
So what is Micron stock actually worth?
TIKR lets you forecast the future price of any stock in less than a minute. Just enter a few assumptions into TIKR’s valuation model and see what Micron could be worth. Start from Wall Street consensus estimates, or adjust the inputs to reflect your own view of the business. It’s free to use.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
