Is It Too Late to Buy Micron Stock After Its 981% Surge?

Key Points

• Micron’s margin growth rate is slowing down, suggesting that the red-hot earnings growth it has been delivering may not be sustainable.

• However, the memory market’s dynamics suggest otherwise, as strong shipment volumes driven by pent-up demand for smartphones and PCs will be a tailwind for Micron.

Micron Technology(NASDAQ:MU) stock has risen by a stunning 981% since the beginning of 2025, as investors have been buying its shares hand over fist to capitalize on the artificial intelligence (AI)-fueled memory boom.

However, Micron stock has been witnessing turbulence lately. Investors have been booking profits in memory stocks amid concerns that the boom may not last forever, especially as memory manufacturers scramble to add new capacity to satisfy the enormous end-market demand. As a result, investors may now be wondering if it is too late to buy shares of Micron following its massive rally since the beginning of 2025.

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We will try to answer that question in this article.

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Micron’s margin growth is slowing down

Micron should ideally trade at an expensive valuation following its remarkable surge. However, that’s not the case. The stock trades at just 22 times trailing earnings, while the forward earnings multiple of 6 makes buying it a no-brainer. Even the price-to-sales ratio of 12 isn’t all that expensive when compared to the U.S. tech sector’s average of 7.4.

After all, Micron’s revenue jumped by almost 4.5x year over year in the previous quarter to $41.5 billion, while adjusted earnings shot up by 13x to $25.11 per share. Micron, therefore, is trading at a big discount right now despite its phenomenal growth. The tech-laden Nasdaq-100 index has a trailing earnings multiple of 34 and a forward earnings multiple of 24.

So, Micron looks like a screaming buy based on its valuation alone. However, the burning question on investors’ minds right now is whether Micron can sustain such solid growth, especially given that its non-GAAP operating margin reached 81.2% in the third quarter of fiscal 2026. That was a big jump from the year-ago period’s reading of 26.8%.

The fact that Micron’s operating margin now sits at more than 80% is probably creating doubt among investors about the company’s ability to sustain its stunning earnings growth rate. The company anticipates its non-GAAP gross margin to grow by just over one percentage point sequentially in the fiscal fourth quarter to 86%. For comparison, it clocked a 10-percentage-point sequential increase in this metric in fiscal Q3.

This explains why analysts anticipate Micron’s earnings growth rate will eventually slow in fiscal 2028 (which begins in September next year).

MU EPS Estimates for Current Fiscal Year data by YCharts

This potential slowdown in Micron’s margin growth is indeed a concern for anyone looking to buy this semiconductor stock right now. However, investors are overlooking a key factor that could help it sustain strong growth over the long run.

Secular memory demand will be a tailwind for the stock

The outstanding increase in Micron’s margins has been fueled by robust memory demand that has been significantly outstripping supply. The good news for Micron investors is that memory demand is likely to continue exceeding supply until the end of the decade. Citrini Research estimates that global dynamic random-access memory (DRAM) supply will fall short of demand by 28.7 exabytes (EB) in 2030.

So, the strong pricing environment that has been fueling solid growth in Micron’s revenue and earnings isn’t going away any time soon. Of course, the company’s margins are already at elevated levels, but it can continue to enjoy healthy sales volumes and pricing, which should boost its revenue and earnings. Also, the new supply that comes online will go toward satisfying pent-up demand in the smartphone and personal computer (PC) markets, where sales are dropping due to a shortage of memory supply.

Smartphone shipments, for instance, are anticipated to drop by 14% this year. Meanwhile, the PC market’s shipments will only recover from 2028, according to IDC. Also, the long-term supply agreements that Micron is entering into should ensure that it continues to clock healthy revenue growth over the long run.

Micron had 16 long-term agreements at the end of fiscal Q3. It noted that 14 of those agreements will help generate at least $100 billion in revenue over the contract term. That’s why analysts have become bullish on its top-line growth prospects.

MU Revenue Estimates for Current Fiscal Year data by YCharts

Moreover, Micron has a 12-month median price target of $1,600, according to 57 analysts covering the stock. That suggests potential upside of 75%. What’s more, almost all the analysts rate the stock as a buy. If Micron continues to outperform analysts’ expectations, it can indeed hit Wall Street’s price target in the coming year.

Also, the stock’s cheap valuation suggests healthy upside potential given the strong earnings growth it could deliver. All in all, it isn’t too late for investors to buy this high-flying tech stock, as it will continue to benefit from the secular growth of the memory market.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.