r/stockmarket
Deep dive on Micron Technology
Author uses a custom Value Score model projecting massive FY27 growth for Micron, calling it a Strong Buy despite cyclical memory risks.
- Custom Value Score of 13.7 is well above the 2.0 buy threshold based on projected FY27 growth.
- Projected FY2027 revenue of $234.56B implies 81% YoY growth with strong margin expansion.
- Even in a bear case where gross margins collapse to 40%, the Value Score remains a highly attractive 8.2.
- The current memory frenzy might be temporary as supply eventually catches up with demand.
- Inventory levels, measured by days sales outstanding, have remained elevated around 120 days for four consecutive quarters.
Micron reported earnings last Wednesday and many people want to know if there is still juice left to squeeze in the stock.
My framework for evaluating stocks is to compare the sum of the projected revenue growth and trailing operating margin to the ratio of enterprise value divided by projected operating income. This is summarized in a number that I call Value Score. The median Value Score for all publicly traded companies is about 1.0. If the Value Score is above 2.0, then I consider the stock a buy candidate.
The average FY 2027 revenue forecast from 40 analysts, as tracked by Yahoo Finance, is $234.56 billion, or 81% growth from FY 2026. I assumed the gross margin for FY 2027 drops to 60% and overhead is about 10% of revenue. With these assumptions, Micron’s Value Score is 13.7!
A lot of people prefer to look at free cash flow over operating income. On that basis, Micron’s Adjusted Value Score is 11.9.
The risk of MU is that the current frenzy for memory is temporary until supply eventually catches up with demand. I also track the company’s inventory levels, as measured by day’s sales outstanding. It has stood around 120 days for four quarters in a row. Meanwhile, gross margin exploded from the high 30s to 85% last quarter.
In summary, I believe MU is a Strong Buy for at least the next twelve months. Even if gross margin were to collapse back to 40%, the Value Score would still be 8.2, which is still far above my 2.0 threshold.
平均目標株価は1300-1500あたりです