Another Micron triple? Where we agree with this wildly bullish call and where we don't
There’s a new Street high price target on Micron — and it’s a jaw-dropping one at that, implying that the Club stock could nearly triple over the next year, on top of its more than five-fold increase in the past 12 months. Trust us, we would be thrilled if this wildly bullish outlook came true. But we aren’t holding our breath. At the heart of the call from DA Davidson’s Gil Luria is that Micron’s memory chips are no longer a commodity in the age of artificial intelligence, so its stock shouldn’t trade at such a steep discount to other parts of the semiconductor ecosystem. The stock is currently trading at 6 times earnings estimates for Micron’s fiscal 2027, which ends in August 2027. The basis of Luria’s new price target is that Micron deserves to trade at roughly a broader-market multiple, or more specifically, 19 times his earnings estimates for fiscal 2027. That’s how he arrived at a target of $3,000 per share, up from $2,100 previously, which was based on a price-to-earnings (P/E) multiple of 13. Though you probably guessed this, Luria also reiterated his buy rating on the stock. Shares of Micron are up almost 4% in Wednesday’s session, bucking a more-than-1% decline in a basket of chip stocks, the iShares Semiconductor ETF . “I’m fully aware of how unusual it is to have a price target that’s three times the level of a stock, especially when it’s a trillion-dollar stock already,” Luria told Investing Club reporter Natasha Abellard Wednesday morning. “But I am doing so because I believe that, as investors think of Micron as a trillion-dollar company, they’re going to realize that it is a much better story than they thought it was.” So, do we agree with Luria? The answer is directionally yes, but specifically no. We agree that the current multiple is too low. But we aren’t ready to jump on the ship of endorsing a nearly 200% move by this time next year, especially when such a move would be predicated on the market changing its mind on what it’s willing to pay for Micron’s future earnings. That’s a much different call than predicting Micron will earn dramatically more profits than the current Wall Street consensus. The rally of the past year has been driven by earnings growth, not multiple expansion; at this time a year ago, the stock had an 11 multiple. We find it hard to believe that investors will be comfortable paying a market multiple within the next year. A brutal history Historically, chip stocks like Micron have been treated like a commodity, trading at a mid-single-digit valuation multiple on peak earnings on the idea that they are cyclical. It’s important to note we’re talking about peak earnings — when the famously boom-and-bust memory industry is in the midst of one of those boom times. The artificial intelligence buildout has, of course, led to this current memory boom. If we zoom out and include Micron’s average price-to-earnings ratio over a longer period, encompassing both booms and busts and everything in between, we will find that it is much higher than the present single-digit multiple and more in line with the market multiple. That, however, is misleading. The reason it’s so high is that when memory supply catches up with demand, the producers’ pricing power collapses and their earnings (the denominator) crater faster than their stock price (the numerator), resulting in a higher P/E multiple. At the same time, when investors sniff out that we’re on the verge of another demand-driven upcycle, they bid memory stocks up ahead of the earnings growth. Once again, this results in an increased multiple as investors try to get ahead of the upward revisions to future profits. Understanding the brutal nature of the cycle and how bad it can get when it rolls over, investors have been conditioned to “reward” the boom part of the cycle with a lower multiple, so as to bake in an adequate level of safety when the bust comes. A new way of doing business With agentic AI bringing on a seemingly insatiable demand for high-bandwidth memory, the current debate is whether the boom-and-bust nature of the industry is a thing of the past — or, at least, whether the cycle is being elongated from its usual three to four years. Micron management has surely done everything it can to drive home that view, most material of which has been the implementation of long-term supply commitments, or SCAs. Most of these multiyear agreements lock in selling-price bands, with floor and ceiling prices, while some agreements rely on periodic price negotiations based on market pricing. When discussing Micron’s 26 long-term supply agreements on the company’s Sept. 30 earnings call, CFO Mark Murphy said: “Even at floor prices, we expect margins meaningfully above any prior cycle peak margins.” These agreements do not cover all future revenues. Executives have said their goal is to have about 50% of revenue through the 2030 timeframe covered by SCAs — a level that Luria argues is the “right balance.” “Much like airlines that optimize their yield by selling seats gradually and maximizing at every step, Micron is balancing visibility with upside. This balance removes the downside while keeping half the upside,” Luria wrote to clients in Wednesday’s big note. Micron isn’t the only one doing this; the updated contractual agreements are an industry-wide phenomenon, which should, in Luria’s view, “make downside less likely across the board. They can all have a better view of capacity and demand, changing the very nature of the cycle.” NVDA 1Y mountain Micron’s year-to-date stock performance. One of our reservations with Luria’s call is simply the magnitude of his projected stock gain. Simply put, it’s difficult to get behind a one-year triple. While we fully acknowledge that the stock has done that and then some over the past 12 months, we believe the memory upcycle story is much more understood today than it was in October 2025. That’s how Micron went from having a $208 billion market cap on Oct. 7, 2025, to a $1.22 trillion market value on Wednesday. Micron’s main memory peers, Korea’s SK Hynix and Samsung, have also enjoyed breathtaking rallies during this time, vaulting into the trillion-dollar market cap club in 2026. It’s one thing for Micron to increase more than 450% and add $1 trillion in market cap when the story is still not fully understood, and earnings estimates are in a race to catch up — in this case, the story is about how important high-bandwidth memory is when it comes to always-on agentic AI offerings like Grok Bot ( SpaceX ), Muse ( Meta Platforms ) and Dots (OpenAI). It’s another thing entirely to add another $2 trillion, which is essentially what this note calls for, after the estimates have already had several quarters to catch up. Luria argues the market is still not appreciating the sustainability of Micron’s earnings growth. “Micron is on a growth trajectory for the next 3-5 years, which is what the market has not yet acknowledged,” he wrote to clients. A central part of his view on Micron is that the market doesn’t understand that the company is no longer in the commodity business. Here’s the case he made to Natasha this morning: Micron, up until three years ago, was a highly cyclical company selling a commodity product… Commodity is a product that’s fungible, meaning it doesn’t matter who you buy it from, that’s sold on a case by case basis, on an invoice by invoice basis. That’s what led Micron to get historically these low valuations, these single-digit multiples on its stock. What’s happened in the last three years is that the nature of Micron’s business, their product and their market, has completely changed. … Up until three years ago, memory chips were used to store information, to store text, video, applications. … Again, they were fungible and they were sold on a case by case basis. Now, memory is how AI works. … The more memory, the better the models work. The more memory, the faster the models work. The more memory, the bigger context window you have to interact with the models. So the nature of the products changed. At the same time, it stopped being fungible. I can’t just interchangeably use Micron or SK Hynix in my data center. If I’m Microsoft, Amazon, Google, and I’m building a data center, I designed the data center in collaboration with either Micron or SK Hynix to their product. It is no longer fungible… So we’re talking about a completely different product, sold in a completely different market on completely different terms. And the market has not recognized or acknowledged that… When the market wraps its head around what I just said, which I don’t think has happened yet, the market at the least will give Micron a market multiple. While Luria has been optimistic on Micron for a while now, he explained that he’s even struggled with the idea of instituting such a bullish price target. But after spending time with Micron’s investor relations team and talking to investors, he said he had enough conviction to go forward. “We used the last two days as an opportunity to talk ourselves out of this high price target, but were unsuccessful. A company that is well positioned, in an important market, and will grow earnings faster than the market for the next 3-5 years, is likely to trade at least at a market multiple,” he wrote to clients. The issue for us isn’t so much that we disagree with Luria’s call for earnings growth, and that it’s too cheap. The issue is that underappreciating something isn’t the same as misunderstanding. In this case, we think the market understands the demand that Micron is currently seeing and the earnings that it will have. In fact, we don’t think Luria is really seeing anything the market isn’t based on the sell-side estimates. Whereas Luria’s fiscal 2027 earnings-per-share estimate stands at $161, the LSEG consensus is already at nearly $174. That’s about 8% ahead of Luria’s current modeling. If that’s the case, then the market has been and is actively voting against the idea of a market multiple, fully understanding what it’s paying for. That doesn’t take the idea of some multiple expansion off the table in the quarters and years. As Micron executes and brings more capacity online, we would expect some multiple expansion. It does, however, mean Luria isn’t any more bullish on Micron fundamentally, at least over the next year, than anyone else. He’s below consensus on both revenue and earnings for the very year his price target is based on. In Luria’s defense, price targets are part art and part science. The estimate is the science, the multiple the business warrants is the art. In other words, we’re arguing about the art part with this. Furthermore, while his price target is based on fiscal 2027 earnings, his argument is about the coming three to five years. That’s harder to argue with, simply because the further out we look, the harder it becomes to forecast. For Micron’s fiscal 2028, the LSEG consensus calls for further earnings growth to about $205 per share, compared with Luria’s own estimate of $191. The question is what comes after that. At the moment, we don’t have concrete consensus for fiscal 2029 and beyond, due to a lack of analyst estimates; there’s a handful, but not enough to declare it an outright consensus. Put another way, we don’t have enough evidence yet to argue that the business model has changed enough to blunt the bust that comes with a loss of pricing power. Until there is, the debate over the sustainability of the memory cycle and the appropriate earnings multiple rages on. ‘It’s the same cycle’ In Luria’s view, we’re in one big semiconductor cycle revolving around AI. Here’s what he told Natasha: “There’s only one cycle now, it’s the AI cycle. If AI continues to grow, all chip companies continue to grow. If AI stops growing, all chip companies stop growing. It’s the same cycle. Why is that important? Because CPU stocks, which are in very similar business, are trading at 40 to 60 times earnings … while Micron trades at six times earnings. … It would be one thing if some of them were trading at 20 times and some at 25 times, that would be a small discrepancy. We’re talking about an entire order of magnitude difference. And that’s what’s so unusual is that there’s nothing you can say about memory that you can’t say about CPUs. The markets are practically identical, and yet the stocks are being treated 10 times differently, not a little differently, 10 times differently. … They are not a different cycle. There’s no CPU cycle and memory cycle. It’s the same cycle. So yeah, they’re cyclical, but you know what? So is financial services, so is industrial, so is consumer. Everything’s cyclical. So I’m not saying it’s not cyclical. Everything’s cyclical. I’m saying that it’s not a commodity. And again, the cycle is the same cycle as everything else in AI, and yet the market is saying, no, no, no, no. I’m sorry, AMD and Intel are going to grow forever, but memory is not. And that doesn’t make any sense because it’s the same cycle.” While we may agree that the spread is perhaps wider than it has ever been, we’re not so sure that it’s fair to say that all chip stocks are equal. It’s true that high-bandwidth memory is a specialized form of DRAM and it’s not fungible like consumer-grade DRAM in an iPhone. HBM makers and customers like Nvidia are working much closer together on the design of the AI computing system. However, the case remains that memory is but one component in a broader system. Should Nvidia — which also has a software component and brings with it networking expertise needed to fully stand up data centers — really trade at the same multiple as the supplier of a single component? We don’t think so. That’s not to say Luria thinks they all warrant the same multiple, but we’re not so sure they should be as close as Luria seems to argue. However, that shouldn’t keep anyone out of Micron. To be clear, we do believe some multiple expansion is warranted, and we also expect a massive buyback announcement once its government restrictions lift in December. Accordingly, we see plenty of upside ahead, even if Luria’s target multiple proves a bit too optimistic. Our current $1,200 target implies about 13% upside and represents about 6.9 times consensus fiscal 2027 estimates. We also felt that the buyback could drive as much as 10% upside in shares, with many on the Street calling for even more. Though we’re keeping that for now, we do think it’s conservative. Between the buyback and maybe some multiple expansion closer to 10 times fiscal 2027 numbers, we see no reason we can’t get closer to a share price in the area of $1,800. We’re just not there yet with the $3,000 call. The bottom line We are aligned with Luria directionally, and though we think the $3,000 target is too rosy in the near-term, we certainly see plenty of upside in the year ahead. For that reason, we maintain our buy-equivalent 1 rating. Despite the gains we’ve seen over the past year, investors will still be rewarded for sticking with the name in the year ahead. Should we be wrong, and Micron does indeed triple again in fiscal 2027, we will be more than happy to get all the hate mail we receive (though that will be drowned out by the ringing of the register). We’ll also be happy to give Luria a call, simply so that he can say, “I told you so”. (Jim Cramer’s Charitable Trust is long MU and NVDA. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. 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