Micron: Why The Stock's Valuation Suddenly Looks Cheaper? (Rating Upgrade)

Johnny Zhang, CFA2.39K FollowersFollow5ShareSavePlay(10min)CommentsSummaryI upgraded MU to a Strong Buy after its 180% YTD rally, as its forward non-GAAP P/E fell to 14x, down from 16x in my last rating.The cheaper valuation is driven by significant upward revisions to forward revenue and earnings consensus.MU's revenue growth continues to accelerate into FY2026, supported by a significant jump in gross margin and triple-digit EPS growth in 1Q FY2026.The recent technology conference in late November indicated that AI data center demand is stronger than previously expected, supporting a double beat in 1Q FY2026.Despite a higher capex of $18 billion for FY2026, management expects FCF to grow significantly, strengthening the stock's quality. JHVEPhoto/iStock Editorial via Getty Images Can the Stock Continue Moving Higher? Micron Technology, Inc.'s (MU) stock has doubled in the past three months. You may be wondering why MU suddenly became one of the hot stocks, despite growing concerns aboutThis article was written byJohnny Zhang, CFA2.39K FollowersFollowI'm specialized in fundamental equity research, global macro strategy, and top-down portfolio construction. I'm a senior analyst at a multi-strategy hedge fund with 7 years of experience. I graduated from UCLA with a degree of Business Economics and UMich Ross School of Business with a Master of Accounting. My articles primarily focus on company fundamentals.Analyst’s Disclosure:I/we have a beneficial long position in the shares of MU:CA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.Quick InsightsWhat is driving Micron's upgraded Strong Buy rating after its sharp rally?MU's Strong Buy rating is supported by accelerating AI-driven demand, significant margin expansion, and a still-attractive 14x forward P/E despite the stock's rally.How does MU's 1Q FY2026 outlook support further upside?Guidance implies gross margin could reach 51.5% and revenue $12.8B (+47% YoY), with expectations for a double beat on top and bottom lines.What are the key forward-looking demand and supply factors for MU?HBM supply is fully contracted for CY2026, management sees ongoing AI demand strength, and DRAM inventories are improving, supporting continued earnings and FCF growth.Recommended For You