The latest results from Micron Technology (NASDAQ:MU) are a case in point. They’re nothing short of spectacular, but their real significance might be much wider.

Micron’s results

Micron’s results were – in a word – epic. The company blew past some pretty optimistic expectations:

Revenues grew 346% and earnings per share increased by 1,215%. And this wasn’t – in my view – the most impressive bit.

Pretty much everyone knew Micron was set for a blowout. Companies are building data centres and they require memory chips.  But what really impressed me was the firm’s forward guidance. The momentum looks set to continue:

The reasons are straightforward. Micron expects strong demand to continue – and its new HBM3E and HBM4 chips are sold out through 2027.

Investors looking for signs of weakness didn’t find them in this report. And I think that matters even for those of us who don’t own the stock.

The state of the stock market

According to the latest data, the risk investors are most worried about is a second wave of US inflation. But an artificial intelligence (AI) bubble is second. 

Source: Hedgefundtips

Furthermore, concerns about an AI bubble are growing. And we all know why – stocks like Micron have been surging to what look like very optimistic levels.

I think investors know how this ends. It ends the way the bubble around vaccine companies ended at the end of the Covid-19 pandemic. Surging demand for vaccine supplies boosted sales, margins, and multiples. But all of this reversed dramatically when things got back to normal.

I can’t help but get a sense that investors know something similar is going to happen with semiconductor stocks. What they don’t know however, is when.

If Micron’s results are anything to go by, it’s not happening in the next three months. But does that give investors a license to buy the stock?

Not for me

Investors look to me like they’re trying to figure out how long the data centre rally can continue. And that can be a dangerous game. I think Warren Buffett said it best. The ‘Oracle of Omaha’ likened this kind of thing to Cindarella at the ball:

“They know that overstaying the festivities … will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.”

Micron’s latest results just told investors that it’s not midnight yet. But nobody knows when that time is coming. It’s not just Micron, by any means. There are plenty more stocks that have been surging recently that I think investors are watching nervously.

That’s why I’m focusing my own attention elsewhere. After all, it’s not as though I can’t find opportunities I like the look of in today’s stock market.

Should you invest £5,000 in Micron Technology right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Micron Technology made the list?

Stephen Wright does not own shares in any of the companies mentioned.

The post What Micron’s blowout results tell investors about the stock market appeared first on The Twelfth Magpie.

Own the chip stock or thinking about buying it for your ISA or SIPP? Here are three things to know.

Q3 earnings are this week

First, let’s talk about Micron’s Q3 earnings. These will be posted after the closing bell on Wednesday 24 June.

Now, we can expect these to be strong because demand for memory chips is off the charts at the moment. Micron announcing recently that it is sold out of high-bandwidth memory for the remainder of this calendar year.

In terms of specific numbers, here’s the Q3 guidance that the company provided last quarter:

Note that in Q3 last financial year, revenue was $9.3bn while non-GAAP diluted earnings per share (EPS) was $1.91. So we are looking at revenue growth of around 270% and EPS growth of around 900%, which is incredible.

I’ll point out that if Micron misses these guidance figures, or its guidance for Q4 is weak, the stock will most likely fall. I think there’s a good chance that the company will beat these forecasts and raise its guidance, given the high demand for memory chips from hyperscalers.

Looking beyond the numbers, investors will be focused on Micron’s spending plans as the company is spending heavily to increase production capacity. They’ll also be focused on contract negotiations – recently memory companies have been locking in longer-term contracts to reduce demand volatility.

Analysts are raising their price targets

Another thing to know about Micron is that analysts are aggressively increasing their price targets at the moment. Here are some increases over the last week or so:

• Deutsche Bank: $1,000 to $1,500
• Citi: $840 to $1,200
• Stifel: $550 to $1,550
• Wedbush: $500 to $1,300
• Bernstein SocGen: $510 to $1,300
• TD Cowen: $660 to $1,500

Almost all of those targets are higher than the current share price. In other words, analysts expect the rally to continue.

The stock still looks cheap

Finally, the valuation is still low. With analysts forecasting earnings per share of $115 for the financial year starting in September, the forward-looking price-to-earnings (P/E) ratio is only around 10.

It needs to be stressed that that $115 figure is just an estimate. There’s no guarantee that Micron’s earnings will be that high.

Will I buy?

Despite this low valuation, and the bullish broker sentiment, I’m not a buyer of the stock today. I’m just not sure about the demand backdrop.

Demand for memory chips could stay high for years. Alternatively, we could just be looking at a short-term bottleneck at the moment.

Another thing that spooks me here is the share price chart. It’s parabolic.

I’ve seen plenty of charts like this in my 25 years of investing and they often reverse sharply at some point. So, I think buying now would be risky.

Given the uncertainty in relation to demand and the chart, I’m going to focus on other stocks in the tech space. I’m looking for companies where long-term revenue growth is nearly guaranteed.

Should you invest £5,000 in Micron Technology right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Micron Technology made the list?

Edward Sheldon does not hold any positions in the companies mentioned.

The post Micron stock: 3 things UK investors need to know today appeared first on The Twelfth Magpie.

Should I buy the dip and add the stock to my ISA? Let’s weigh up the bull case versus the bear case.

Exploring the bull case

The upbeat case for Micron is multi-faceted. For a start, we have the fact that demand for the company’s memory chips is sky-high today.

It’s so high that Micron is actually sold out for the rest of 2026. Note that this high level of demand is giving it more pricing power than it has had in the past.

Second, the company is negotiating longer-term supply agreements with customers. This is another major positive.

In the past, demand for memory chips has been highly cyclical. These long-term agreements should help to mitigate cyclicality.

Third, revenue and earnings growth is incredible. Last quarter, for example, revenue and earnings per share (EPS) were up 195% and 756%, respectively.

For the year ending 31 August, revenue and EPS are expected to be $110bn and $58.50. That compares to $37bn and $8.29 last financial year.

Fourth, we have a relatively low valuation. Taking that earnings forecast above, we get a price-to-earnings (P/E) ratio of just 17.

Finally, analysts are aggressively increasing their price targets for the stock. UBS, for example, just went to $1,625.

Overall, there are many reasons to be bullish.

Bear case risks

In terms of the base case, this mainly revolves around the fact that history shows that at some stage, demand for memory chips will moderate and/or supply will catch up with demand. If either of these scenarios were to materialise, the company’s financial momentum could deteriorate quickly.

In the past, this company has had some major downturns in revenue and earnings when demand has cooled. In 2023, for example, revenues fell around 50% while earnings went negative.

It’s worth pointing out here that it looks like demand will remain high in the short term. Next year, hyperscalers are projected to spend over $1trn on AI infrastructure so this should support demand.

Taking a long-term view, however, there’s considerable uncertainty. My colleague Stephen Wright believes that there’s a good chance that demand will moderate between now and 2030 and that Micron’s share price will fall back to $500.

Speaking of the share price, another factor within the bear case is the pace of its recent rise (the chart is parabolic). Ultimately, it’s not normal for a large-cap stock to rise 750% in a year like Micron has.

When stocks rise like this, they often fall sharply at some stage for one reason or another. In this case, I think there’s a fair bit of speculative capital in the stock that could be tempted to exit if another exciting opportunity came along (like the Anthropic IPO).

Better opportunities?

Weighing everything up, I’m not going to buy Micron stock for my portfolio right now. I just see too much risk here given the share price spike over the last year.

I’m going to focus on other stocks in the growth space. Because there are lots of great opportunities to consider out there today.

Should you invest £5,000 in Micron Technology right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Micron Technology made the list?

Edward Sheldon does not hold any positions in the companies mentioned

The post Micron stock is down 9% from its highs. Should I buy the dip? appeared first on The Twelfth Magpie.

The fundamentals supporting rising share prices still look pretty good – at least, for the time being. So what should ordinary investors like me do?

What are the professionals doing?

Professional fund managers think long semiconductor equipment stocks is the most crowded trade right now. That’s according to the latest Bank of America survey.

Source: Hedgefundtips

On the face of it, that looks like a sell signal. For stocks to keep going up, there needs to be more buyers – and those appear to be running out.

The thing is, it’s not quite as straightforward as this. Despite their reservations, the percentage of managers overweight in equities is at a record high.

Source: Hedgefundtips

In a way, it makes sense – institutional investors can’t afford to miss out on what looks like the only game in town. But things are different for the rest of us.

If you’re investing your own money, you don’t have to participate in everything. So should you do what the smart money is saying, or what it’s doing?

Follow the money

In fairness, the AI boom isn’t just hype and hope. Companies involved in building data centres are making huge profits. 

One stock I refer to a lot in this context is Micron Technology (NASDAQ:MU). The company reported Q1 earnings per share of $12.07 – up 756% from the previous year.

That’s a huge increase, which is why the stock is up. And analysts are expecting this to continue at least into next year:

Source: Nasdaq.com

In my view, this is a highly plausible assumption. The reason is pretty straightforward – data centre spending is set to keep going higher.

Amazon, for example, is expected to spend $200bn this year on AI. And analysts think that number is going to reach $209bn in 2027.

While the spending keeps coming, the likes of Micron should do well. But sooner or later, it will stop – and when that happens, things could get ugly.

Warren Buffett

There’s a Warren Buffett quote that I think long-term investors should keep in mind at times like these. It’s this one:

If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes.

If AI spending stays at its current level for 10 years, Micron shares look like a bargain. But I don’t think that’s likely. 

Amazon is still building into strong demand and it might stay that way for another 18 months. But there’s no way of knowing when things will change.

The issue with Micron is that its earnings don’t just go down in a downturn – they go negative. And investors won’t want to own the stock if that happens.

Source: Fiscal.ai

The stock is at $965 right now. It might well go higher from these levels, but I also think there’s a good chance it’ll be below $500 before 2030.

Is it too late to buy?

The smart money is backing AI stocks. And as long as the likes of Amazon keep spending, there’s good reason to expect this to work in the short term.

From a longer-term perspective, however, things look different. With a 10-year horizon, I think the opportunities elsewhere look much more attractive.

Stephen Wright owns shares in Amazon.

The post The smart money thinks AI stocks look risky — but is there still a chance to buy? appeared first on The Twelfth Magpie.

Analysts at UBS clearly think so – check out their latest price target.

A massive increase

UBS’s new price target for Micron is $1,625. That represents a huge increase – their old target was just $535 (that kind of increase is almost unheard of).

It also represents a huge potential gain from here. If it was to come to fruition, investors could be looking at a gain of almost 80%.

A game-changer for Micron

In its research note, UBS analyst Timothy Arcuri said that long-term supply agreements with hyperscalers are now firmly in place across most of the memory industry. His view is that these long-term agreements will structurally transform Micron’s earnings profile.

Looking ahead, UBS now expects the memory company to generate earnings per share of $155, $167, and $117 for calendar years 2027, 2028 and 2029 respectively, up from previous estimates of $133, $122, and $77.

The new $1,625 price target is based on around 15 times next-12-month earnings, with Arcuri noting he sees “no reason why Micron should trade a whole lot differently than Nvidia in terms of P/E“.

Is there an investment opportunity here?

Should investors consider buying Micron stock given this bullish sentiment? That’s hard to say – this is a bit of a tricky one.

On one hand, demand for memory (from hyperscalers) is sky-high right now. This is allowing Micron and other memory companies to charge significantly higher prices for their products, which is leading to sharply higher revenues and earnings.

Meanwhile, the memory companies are locking in long-term supply agreements as mentioned above. This is a major development because historically, memory demand has been very up and down (in 2023 Micron’s revenue fell around 50%).

Another positive is the valuation, which is still low despite the enormous share price increase here over the last year. If we take that 2027 earnings figure above, we get a price-to-earnings (P/E) of around six!

On the other hand, there’s a chance that cyclicality could return to the memory chip market. At some stage in the next few years, we could see demand from hyperscalers fall as AI systems become more efficient.

We could also see more companies enter the market given the huge profits that Micron and others are making right now. This risk shouldn’t be ignored – unlike GPUs, memory chips tend to be commoditised meaning that they are all relatively similar.

One other risk is the fact that the stock is up 850% over the last year and the chart is parabolic. I’ve seen plenty of moves like this in 25 years of investing and they often end badly.

Weighing up the bull case and the bear case, I’m going to sit on the fence and take a neutral view. A small position here could be worth considering if one is comfortable with the risks but I do see this stock as very risky after its huge move higher.

In my view, there are better growth stocks to consider buying today.

Should you invest £5,000 in Micron Technology right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Micron Technology made the list?

Edward Sheldon owns shares in Nvidia and Nasdaq

The post Analysts at UBS just set a jaw-dropping price target for Nasdaq stock Micron appeared first on The Twelfth Magpie.

The thing is, it still looks very cheap – the forward-looking price-to-earnings (P/E) ratio today is only 7.3. So could it still be worth considering for a Stocks and Shares ISA or Self-Invested Personal Pension (SIPP)?

Strong fundamentals

There’s no doubt that the fundamentals for Micron today look strong. Right now, hyperscalers (eg Amazon and Alphabet) are scrambling to buy memory chips for their data centres (because generative AI systems need memory to operate) and the company’s benefitting.

Just look at some of the figures from its recent Q2 fiscal 2026 earnings:

• Revenue of $23.86bn, up 196% year on year.
• Cloud Memory Business Unit revenue of $7.75bn, up 163%.
• Core Data Centre Business Unit revenue of $5.69bn, up 211%.
• Net income of $14bn, up 686%.

Looking at these numbers, the company is on fire at the moment.

“In the AI era, memory has become a strategic asset for our customers”

Sanjay Mehrotra, Chairman, President and CEO of Micron Technology

More growth to come?

Looking ahead, analysts expect the momentum to continue in the medium term as there’s a major shortage of memory chips at the moment (meaning Micron has pricing power). This financial year (ending 31 August), revenue is expected to come in at $109bn versus $37bn last year.

Meanwhile, next financial year, the forecast is $176bn. So we could be looking at some prolific growth in the near future.

What could go wrong?

While this all sounds exciting, it’s important to understand the basics of the memory market. Because it’s quite different to other areas of the chip market (eg GPUs and CPUs).

One thing to understand about the memory market is that it’s largely commoditised (products from different companies tend to be pretty similar).

By contrast, the GPU market’s highly differentiated. For example, in recent years, Nvidia’s GPUs have been far superior to others’ products.

Another thing to understand is that demand can fluctuate significantly. In the past, this has been a very cyclical market.

What tends to happen is that when demand’s high and supply’s short, tech companies over-order memory chips in an effort to try and guarantee supply. This can lead to sharp drop-offs in demand when demand moderates and/or supply catches up with demand.

Are Micron shares worth it?

Given these issues, Micron isn’t a guaranteed winner, even though the stock looks really cheap today. Because at some stage, growth could slow dramatically.

If it were to slow, and earnings fell, the stock wouldn’t look so cheap. In this scenario, I’d expect the share price to fall (perhaps significantly).

So investors really need to give some thought to the fundamentals of the memory market if they are interested in Micron shares. Because the market backdrop will have a big impact on the trajectory of the shares.

If investors expect demand for memory chips to remain high in the years ahead (note that Micron’s signing long-term deals at the moment), the shares could be worth considering. If however, they expect the memory market to cool at some stage in the not-too-distant future, they might want to look at other growth stocks.

Edward Sheldon has positions in Nvidia, Amazon, and Alphabet. The Twelfth Magpie has recommended Nvidia, Amazon, and Alphabet. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor and Hidden Winners. Here at The Twelfth Magpie, we believe that considering a diverse range of insights makes us better investors.

The post Is growth stock Micron a steal on a P/E ratio of 7.3? appeared first on The Twelfth Magpie.

So why are investors scrambling to buy into this tech company? And should those who don’t own any shares consider buying some?

What’s going on with Micron?

Micron’s a memory chip company. And right now, demand for memory is sky high (so much so that there’s a global shortage).

The reason for this is that memory is required to run generative AI models like ChatGPT, Gemini, and Claude. Ultimately, it’s memory that allows these models to learn during training and remember the conversations they have with users.

Now, given the high demand for memory, Micron’s revenues and earnings are surging. In March, for example, the company reported Q2 revenue of $23.86bn versus $8.05bn for the same period a year ago along with non-GAAP earnings of $12.07 per share versus $1.41 a year earlier.

Looking ahead, analysts expect the growth to continue in the near term (they’re scrambling to raise their forecasts). For example, for the financial year ending 31 August, analysts expect revenue of $108.7bn versus $37.4bn last year.

This prolific level of growth is the main reason investors are piling into the stock now. But it’s not the only reason.

A cheap tech stock?

Another is the valuation. At present, Micron stock appears to be very cheap. With analysts expecting earnings per share of $57.50 for this financial year, the price-to-earnings (P/E) ratio’s only 11.1. So we appear to have growth at a reasonable price.

The share price is soaring

One other reason the stock’s grabbing a lot of attention right now is that its share price is flying. Over the last year, it’s risen around 700%. Explosive share price moves like this tend to attract a lot of ‘hot’ money. I’ve no doubt that there are a lot of ‘momentum’ investors in this name at the moment.

Can it keep rising?

Is the stock worth a look today? That’s hard to say. There’s no doubting the near-term fundamentals look very strong. Next financial year, Micron’s revenue and earnings per share are expected to rise 62% and 71% respectively.

The valuation also looks attractive. Taking next financial year’s earnings figure, the P/E ratio is just 6.5.

The problem is, at some stage, memory supply’s likely to catch up with demand. This may well lead to a slowdown in growth and potentially a drop in earnings.

When this happens, the stock could come crashing down given its recent parabolic move higher. Typically, when stocks shoot up as Micron has, they tend to experience sharp falls when conditions change.

So it really comes down to an individual’s view on the memory landscape. If you believe demand for memory will remain high in the years ahead, the stock could be worth considering.

If however, you think that supply will catch up with demand or that demand will moderate, there may be better stocks to look at given that Micron’s up 700% in a year.

The post Why is everyone buying S&P 500 tech stock Micron? appeared first on The Twelfth Magpie.

Growth and value

A classic example of a stock market cycle is the shift from growth to value and back. The core structure’s pretty straightforward. Investors naturally look for growth stocks. But then something happens that reminds them these things are supposed to have valuations.

Rising interest rates are a good candidate. So investors go looking for companies with stronger current cash flows. These are value shares. But sooner or later, investors realise these businesses don’t grow much and go back to growth stocks. And so on… 

The best way to invest is by doing the opposite of what everyone else is up to. And the situation in the US is interesting right now.

Artificial intelligence 

The rise of artificial intelligence (AI) has had a big impact on tech. But while software has faltered, other names have done well. One of these is Micron (NASDAQ:MU). Quarterly sales are up 200% and the share price has climbed 555% in the last year.

Analysts are expecting strong earnings per share (EPS) growth for the next few years. But investors do need to be careful. 

Source: Nasdaq.com

Those earnings are important. But a discounted cash flow (DCF) analysis shows that they’re not the only thing that matters. A DCF calculation shows the present value of those projected earnings. Using a 9% discount rate, they look like this: 

Together, they make up less than half of the current share price. So what happens after the next three years matters much more. 

Long-term investing

Micron’s clearly benefitting from a cyclical boost. But the question is what happens when that changes?

Sales also surged during the pandemic. When things normalised though, profits turned negative. The stock fell more than 50% as a result. And I think there’s a decent chance something similar happens again.

That wouldn’t matter if the short-term earnings boost was enough to justify the current price by itself. But it isn’t. At today’s prices, there needs to be more than just a big cyclical boost coming. Otherwise the stock looks too expensive. 

AI might mean higher long-term demand for memory chips. But, in Micron’s case at least, this is already priced in.

Foolish conclusion 

Micron’s average annual EPS over the last 10 years has been around $7. But that isn’t enough to justify a $456 share price. Assuming a 4% terminal growth rate, that’s $81 in present value. Added to $205 for the next three years, that’s well below the current price.

That means investors need AI to be more than a short-term surge in demand. It needs to be a permanent change.

The current share price implies around $22 in normalised future EPS. That’s a big increase. Given this, I think there are more compelling opportunities right now. But I’m expecting a better chance at Micron when things look less positive.

The post Stock market cycles: where are we now and what’s coming next? appeared first on The Twelfth Magpie.

So what’s driving it, and is there still a case to be made at current levels?

The new Intel?

Think about what actually happens when a hyperscaler upgrades its servers. It’s not just buying a new Nvidia GPU. The memory’s physically attached to the die, so new hardware means new Micron chips too.

The upgrade cycle and the memory cycle are the same cycle.

That’s a remarkably strong position to be in. It’s reminiscent of where Intel sat in the 1990s — not because the businesses are identical, but because both companies found themselves embedded so deeply into the prevailing technology stack that growth elsewhere in the industry translated almost automatically into growth for them. Intel rose 7,000% over that decade. 

A noteworthy pullback

Last month, Google announced TurboQuant — an algorithm designed to reduce memory requirements for AI workloads by up to a factor of six. Memory stocks fell sharply. The market read it as a demand killer.

It probably isn’t. The same logic was applied to DeepSeek’s efficiency gains last year, and what followed was more compute spending, not less. When you can do more with less, developers tend to simply do more. The Jevons paradox has a habit of making itself relevant.

Valuation looks even better today

This is where it gets genuinely interesting. On a forward non-GAAP price-to-earnings basis, Micron trades at around 6.3 times — versus a sector median of 21.8 times. That’s a discount of roughly 71%.

The forward price-to-earnings-to-growth (PEG) ratio sits at 0.05, against a sector average of 1.32. Across almost every metric, Micron screens as one of the cheapest large-cap technology companies in the market.

The issue is the sustainability of earnings. Due to a shortage, memory prices have surged. And this is why some analysts see Micron’s earnings falling from 2027 to 2028.

With the company spending billions on new factories and capacity, the question is whether higher volume can offset moderating prices. Some will highlight that the sector has been very cyclical in the past. I’d suggest that cyclicality may not be an issue with AI.

What if it’s still cyclical?

As noted, the current cycle’s being supercharged by AI infrastructure spending at a scale the industry has never seen — customers are locking in supply years out, which itself signals how tight things are.

Some analysts argue that, at some point, capex from the hyperscalers moderates, and when it does, the memory market will feel it.

As such, appropriate position-sizing matters here.

For what’s its worth, I disagree with this thesis. Memory’s soldered into servers and GPUs and typically lasts the life of the hardware. The replacement cycle will reflect that.

I think institutional analysts agree — the price target’s 40% above the current price.

The bottom line

It’s absolute worth considering. The valuation discount is too large to ignore for a company that sits at the centre of the AI infrastructure build-out. The sell-off looks like an overreaction.

The post £10,000 invested in Micron stock six months ago is now worth… appeared first on The Twelfth Magpie.

Now, I’ve completely missed out on these explosive gains sadly. Could the tech stock still be worth buying for my ISA though?

Blowout earnings

Last night (18 March), Micron posted its earnings for the second quarter of its fiscal 2026 year. And they blew the doors off Wall Street expectations.

For the quarter, revenue came in at a record $23.86bn, up 196% year on year. Meanwhile, adjusted earnings per share came in at a record $12.20 – miles ahead of the consensus forecast of $9.31 – versus $1.56 a year earlier (+682% year on year).

Commenting on the earnings, CEO Sanjay Mehrotra said: “In the AI era, memory has become a strategic asset for our customers.” He added that the company expects “significant records again in fiscal Q3.”

Zooming in on the guidance, the company said that for Q3, it expects revenue of $33.5bn plus or minus $750m (implying year-on-year growth of over 250%) and diluted earnings per share of $19.15 plus or minus $0.40. Analysts had been expecting $12.05 in earnings per share on $24.3bn in revenue so this guidance was way above estimates.

The stock still looks cheap

So clearly, Micron is benefitting from the AI boom. What’s happening is that demand for memory is surging as a result of high demand for GPUs made by the likes of Nvidia, which require memory to power generative AI models.

What’s interesting is that the stock still looks really cheap. Currently, it trades on a forward-looking price-to-earnings (P/E) ratio of just 7.3 using next financial year’s earnings forecast (which may go up given the momentum the company has right now).

Note that several Wall Street firms have raised their price targets for the stock after last night’s earnings. Both JP Morgan and TD Cowen are targeting $550 – about 24% higher than the current share price.

What are the risks?

However, while there’s a lot to be excited about here, there are quite a few risks. One is that the memory business is cyclical.

So, while Micron’s revenues are surging right now, things could quickly change. Note that in 2016, 2019, and 2023, Micron’s revenues plummeted year on year.

In the near term, the AI boom should support demand. But if Big Tech companies stop spending on Nvidia’s GPUs, things could get ugly.

Another issue is that Micron just told investors that capital expenditures will “step up meaningfully” in fiscal 2027 with construction-related costs rising by over $10bn. This kind of capex could hit profits.

Of course, after a 350% rise in the share price over the last year (the chart is parabolic and that scares me), there’s always the chance of some profit taking at some point (maybe even today). This is another risk to consider.

My move now

Putting this all together, I’m not going to buy Micron stock yet. I need to do some more research.

I want to get a better idea of long-term demand for memory. I also want to learn more about the company’s competitive advantage.

The post Should I buy Nasdaq stock Micron for my ISA after blowout Q2 earnings? appeared first on The Twelfth Magpie.