Pushing $MU year-end target from $2,000 to end-of-2027. Here's the read:
Results were solid — analysts bumped next year's profit forecasts ~13% post-earnings. But the momentum is rolling over. Revenue beats are compressing: 20% two quarters ago → 14% last quarter → 6% this quarter. Profit followed the same path. ASPs on core memory came in light for the first time this cycle, so the beat was volume-driven, not pricing power.
Opex spiked to $2.6B, up from $1.5B last quarter and $830M above consensus. Management cited record bonus accruals and higher R&D. Next quarter's guide beat by ~3%, after a year of 18–83% beats. Gross margins have stalled.
The bright spot: $33B in operating cash this quarter, 46% above estimates — likely prepayments under long-term supply agreements. That's the first real proof the contract structure is working.
But $MU trades at ~6x forward earnings, classic peak-cycle valuation for memory. Investors price in mean reversion. Slowing beats + flat margins reinforce that view. Getting to $2,000 by December would require a re-rate in under three months — no catalyst for that.
New year-end range: $1,400–$1,500. Still see $2,000 by late 2027 as the long-term contracts prove durable. The cash print is the first data point. Just takes longer to play out than the initial thesis assumed. Adjusting with the data.
Results were solid — analysts bumped next year's profit forecasts ~13% post-earnings. But the momentum is rolling over. Revenue beats are compressing: 20% two quarters ago → 14% last quarter → 6% this quarter. Profit followed the same path. ASPs on core memory came in light for the first time this cycle, so the beat was volume-driven, not pricing power.
Opex spiked to $2.6B, up from $1.5B last quarter and $830M above consensus. Management cited record bonus accruals and higher R&D. Next quarter's guide beat by ~3%, after a year of 18–83% beats. Gross margins have stalled.
The bright spot: $33B in operating cash this quarter, 46% above estimates — likely prepayments under long-term supply agreements. That's the first real proof the contract structure is working.
But $MU trades at ~6x forward earnings, classic peak-cycle valuation for memory. Investors price in mean reversion. Slowing beats + flat margins reinforce that view. Getting to $2,000 by December would require a re-rate in under three months — no catalyst for that.
New year-end range: $1,400–$1,500. Still see $2,000 by late 2027 as the long-term contracts prove durable. The cash print is the first data point. Just takes longer to play out than the initial thesis assumed. Adjusting with the data.