"Successful worries": Micron Technology (MU.US) enjoys the benefits of AI and rises to a new historical high, it is still considered "cheap."

Since the beginning of the year, storage chip giant Micron Technology, Inc. (MU.US) has seen a resurgence in growth prospects, as well as a surge in stock price of over 250%, thanks to leveraging the long-term dividends of the cloud supercomputing cycle and strong orders for its HBM3E/HBM4 products from large-scale data center clients. However, despite this, taking into account the company's improved bargaining power, the tight supply-demand situation in the market, and the continued expansion of production capacity until 2030, analysts at Juxtaposed Ideas believe that although Micron is "under pressure from the success of AI", its valuation remains in a value bargain. Micron Technology, Inc.: The Core Beneficiary of the AI Wave By the end of the year, Micron's rapid rise has not slowed down and continued to hit historical highs on Monday, while some semiconductor and storage chip peers have entered a downturn following the fading of the AI concept in November, due to high valuation and increased debt risks. The core driver behind Micron's strong stock performance lies in its previously severely undervalued valuation level - with the recent market style shift, funds have poured into deep value targets like Micron. More importantly, Micron has successfully seized the opportunity in the cloud supercomputing cycle, with its HBM3E/HBM4 products winning the favor of large-scale customers. This not only put an end to the stagnation in demand for storage chips and high inventory levels since 2022, but also opened up new growth opportunities. For example, Micron has explicitly stated that the current market is "tight in supply", explaining why its 2026 HBM production capacity has been fully sold out. At the same time, the overall HBM market is expanding rapidly, with an expected growth from $35 billion in 2025 to $100 billion in 2028, with a three-year compound annual growth rate of 41.9%. In the view of Juxtaposed Ideas, this growth target is not aggressive. Against the backdrop of the cloud supercomputing cycle, Micron has established a close partnership with NVIDIA Corporation (NVDA.US) and is accelerating product certification through multiple large-scale data center clients. As the market consensus states: "AI workloads require massive storage support... compared to consumer devices, the demand for single system storage capacity in AI servers and enterprise application scenarios is growing exponentially." The explosive growth in storage demand has been reflected in multiple dimensions: continuous decrease in inventory levels, significant increase in product prices, shift from annual pricing to monthly pricing in contract pricing models, and significant increase in long-term order signing volume. Based on this market trend, Micron has initiated a business portfolio transformation, deciding to close its consumer-level brand Crucial, focusing on "long-term profitable growth tracks in storage and data storage areas". Behind this strategic adjustment is the growth bottleneck in consumer business. Micron's Mobile and Client Business Unit (MCBU) mainly sells Crucial brand solid state drives and memory sticks. In the 2025 fiscal year, this business unit had a revenue of $11.86 billion, a mere 1.6% growth compared to the previous year, with an operating profit margin of 16.7%, indicating insufficient profitability and growth momentum. In contrast, the other two core business units saw significant growth: the Cloud Computing Storage Business Unit (CMBU) had a revenue of $13.52 billion in the 2025 fiscal year, a staggering increase of 256.7%, with an operating profit margin as high as 45.2%, an increase of 38.8 percentage points compared to the previous year, only slightly lower than the 2019 level of 46.5%; and the Core Data Center Business Unit (CDBU) saw a revenue of $7.22 billion in the same period, a growth of 44.9%, with an operating profit margin of 30.1%, an increase of 25 percentage points compared to the previous year, but a decrease of 16.4 percentage points from 2019. In comparison, it is clear to see the strategic foresight of Micron's business transformation. After closing the consumer business, the freed-up capacity can be redirected towards high-growth, high-profit product areas. At the same time, Micron has raised its 2026 capital expenditure guidance to $20 billion, a year-on-year increase of 44.9%, and plans to build new capacity in 2027, 2028, and 2030 to further solidify its supply capacity. This capacity expansion plan comes at the right time. In October, Alphabet Inc. Class C (GOOGL.US), Amazon.com, Inc. (AMZN.US), Microsoft Corporation (MSFT.US), and Meta (META.US) and other tech giants have approached Micron with unlimited purchasing demands, clearly stating "no matter the price, the company can deliver as much as needed". A similar demand surge is also seen in the AI field. Samsung Electronics (SSNLF.US) and SK Hynix plan to expand production capacity, aiming to produce up to 900,000 high-bandwidth DRAM memory chips per month to meet the demands of the "Star Gate" project and AI data centers. In another statement, the SK Group pointed out that this production capacity would be more than double the total current industry high-bandwidth storage chip production capacity. This means that until the market supply shortage eases, Micron will have strong pricing power. This is also reflected in the financial data: in the first quarter of the 2026 fiscal year, Micron's adjusted gross margin reached 56.8%, an increase of 17.3 percentage points year-on-year; the full-year adjusted gross margin for the 2025 fiscal year was 40.9%, an increase of 17.2 percentage points year-on-year, but a decrease of 6 percentage points compared to 2019. A series of data indicates that after hitting a low point in 2022, Micron has returned to a high growth trajectory. Strong earnings growth momentum, attractive valuation In the first quarter of the 2026 fiscal year, Micron's adjusted earnings per share reached $4.78, an increase of 57.7% quarter-on-quarter and a staggering 167% year-on-year; management's guidance for the second quarter of the 2026 fiscal year is even more optimistic, with an expected adjusted earnings per share of $8.42, an increase of 76.1% quarter-on-quarter and a soaring 439.7% year-on-year. Based on this calculation, Micron's expected adjusted earnings per share for the second half of the 2026 fiscal year is approximately $13.20, an increase of 294% year-on-year; with revenue expected to be around $32.34 billion, a growth of 92.9% year-on-year. These impressive figures mark a complete reversal of Micron's revenue and profit downturn in the 2023 fiscal year, and have led the market to increase its long-term growth expectations. It is expected that by the 2030 fiscal year, Micron's compound annual revenue and net profit growth rates will reach 14.9% and 18.6%, respectively. Comparing these projections with historical data, Micron's compound annual revenue and net profit growth rates for the past 5 years were 11.8% and 24%, and for the past 10 years were 8.7% and 11.9%. The significant upward revision of performance expectations has driven its stock price to a cumulative increase of 355% since the low point in April 2025. Despite the significant increase in stock price, from a valuation perspective, Micron remains very attractive. Based on a current stock price of $276.27, and an annualized adjusted earnings per share value of $26.40 for the first half of the 2026 fiscal year, Micron's estimated non-GAAP P/E ratio for the 2026 fiscal year is only 10.46. In terms of valuation history percentiles: this value is not only lower than the 1 year average of 11.52, but also significantly lower than the 5 year average of 75.59, the pre-pandemic 5 year average of 18.25, and the 10 year average of 24.99. In terms of growth valuation indicators, based on an annualized adjusted earnings per share value of $26.40 for the first half of the 2026 fiscal year, and the market's consistent expectation of an adjusted earnings per share of $35.14 for the 2028 fiscal year, Micron's expected non-GAAP P/E ratio relative to the profit growth rate (PEG) for the next two years is only 0.68. This is significantly lower than the 5-year average of 3.15, the pre-pandemic average of 18.25, and the 10-year average of 2.10, showing a clear valuation advantage. Compared to comparable companies in the same industry, Micron's valuation ratio is also outstanding (expected non-GAAP P/E ratio/expected non-GAAP PEG ratio for the next 3 years): Samsung Electronics: 25.35/0.74; NVIDIA Corporation: 40.35/0.84; AMD: 54.19/1.19; Broadcom Inc.: 34.69/0.93; Marvell Technology, Inc.: 30.98/0.68. Therefore, despite the stock price more than tripling, relying on the strong demand for HBM3E/HBM4 products, high growth and high profit business prospects, and expected strong free cash flow even with high capital expenditures until 2030, Micron's valuation remains in a reasonable range. Financial data also confirms this: in the first quarter of the 2026 fiscal year, Micron's free cash flow reached $3.9 billion, an increase of 387.5% quarter-on-quarter and a staggering 3387.5% year-on-year; the full-year free cash flow for the 2025 fiscal year was $3.72 billion, an increase of 863.9% year-on-year. The abundant cash flow has also optimized the company's balance sheet, reducing net debt to $1.43 billion, a decrease of 76.9% year-on-year. Micron remains a top pick for Beijing Zhidemai Technology In the past few months, Micron's stock price has seen a nearly vertical upward trend, continuously breaking through the 50-day, 100-day, and 200-day moving averages, hitting new historical highs. With an expected non-GAAP P/E ratio of 10.46 for the 2026 fiscal year, and an annualized adjusted earnings per share value of $26.40 for the first half of the year, Micron's current stock price of $276.27 is very close to Juxtaposed Ideas' fair value estimate of $276.10. If we use the market's consensus expected adjusted earnings per share of $35.14 for the 2028 fiscal year, Micron's stock price could rise to Juxtaposed Ideas' long-term target price of $367.50, representing a potential upside of nearly 30%. What is even more promising is that, with the long-term dividends of the cloud supercomputing cycle, strong demand for HBM products, an optimized balance sheet, and a very attractive valuation level, plus Micron's solid 26% market share in the global storage chip market, its valuation could converge towards the pre-pandemic 5-year average of 18.25 - a level significantly lower than the industry average of about 32 times, and close to Samsung Electronics' valuation of 17.69 times. If the valuation returns to this level, Micron's stock price could reach Juxtaposed Ideas' optimistic long-term target price of $641.30, representing a potential increase of over 130%. Risk Warning It is worth noting that after a significant increase, Micron's Relative Strength Index (RSI) and trading volume are at high levels, entering overbought territory, indicating an overly strong upward momentum in the short term. Considering that market sentiment towards high-growth, high-profit targets may change at any time, leading to price fluctuations, Juxtaposed Ideas recommends that interested investors wait patiently for a price correction, and consider entering the market when the price falls to a more secure level. The previous resistance level for Micron's stock price in November 2025 (around the $240 range), which is also close to the 50-day moving average (around $232), may be a better entry point. Entering at that time may provide a better margin of safety and long-term return potential.