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Micron’s (MU) impressive rally has lost momentum, with MU stock retreating 28.9% from its peak. The pullback reflects investor concerns that memory pricing could come under pressure as competition intensifies. In addition, profit-taking following the stock’s strong run dragged it lower.
Despite the sharp decline, Wall Street analysts have maintained their bullish stance. This indicates that the correction does not signal a deterioration in Micron’s underlying fundamentals. Instead, analysts continue to view the company as well positioned to capitalize on robust artificial intelligence (AI)-driven demand.
Strong adoption of its DRAM and NAND products, favorable pricing environment, and an attractive valuation continue to support MU’s long-term investment case.
Micron’s Growth Isn’t Slowing Down
Despite concerns about rising competition, Micron's growth trajectory will likely remain solid. Demand for memory storage products continues to outpace supply, creating a favorable pricing environment that could persist beyond calendar year 2027.
Notably, strong demand for AI-related memory products and higher selling prices have helped Micron deliver record revenue and significantly improved profitability during the last reported quarter. DRAM remained the company's largest growth driver. Revenue climbed to $31.3 billion, representing a 343% year-over-year (YOY) increase. While higher bit shipments contributed to the growth, the biggest catalyst was a sharp increase in average selling prices (ASPs), which rose in the low-60% range amid industry-wide supply constraints and a favorable product mix.
NAND also posted exceptional results. Micron’s NAND revenue reached a record $9.9 billion, rising 361% YOY and 99% sequentially. Bit shipments increased by a mid-single-digit percentage, while ASPs surged in the mid-80% range as tight market conditions continued to support pricing.
Micron's outlook remains favorable because the industry's supply-demand dynamics continue to work in its favor. AI infrastructure investments continue to accelerate, driving demand for high-performance memory used in data centers and advanced AI applications.
As a result, industry demand is expected to exceed supply well into 2027. With a favorable demand and pricing environment, Micron will continue to deliver stronger revenue growth, expanding profit margins, and robust earnings growth over the next several years.
SCA’s Enhance Micron’s Revenue Stability
A key pillar of Micron's long-term investment appeal is its expanding portfolio of Strategic Customer Agreements (SCAs), which significantly improves revenue predictability and adds stability to its earnings.
In its most recent quarter, Micron secured 16 new long-term agreements that cover a substantial share of its DRAM and NAND production capacity through the end of this decade. Management noted that additional contracts are expected to be signed as customer demand for long-term supply commitments continues to grow.
Most of these agreements follow a take-or-pay structure, requiring customers to purchase minimum committed volumes even if short-term market conditions weaken. This arrangement provides Micron with a more dependable revenue stream. The contracts also incorporate pricing frameworks designed to protect profitability. These mechanisms establish pricing floors that help shield the company from severe market downturns while still supporting attractive margins.
Most importantly, 14 of these long-term agreements represent roughly $100 billion in guaranteed minimum revenue. This substantial backlog strengthens Micron's long-term earnings outlook, enhances cash flow visibility, and strengthens confidence in the company's ability to deliver strong growth ahead.
Micron’s Attractive Valuation Strengthens the Investment Case
The recent correction has made Micron's valuation compelling. Despite strong demand and a pricing environment, Micron stock trades at 12.28 times forward price-to-earnings, a relatively inexpensive multiple considering its expected growth. Analysts project MU’s earnings per share (EPS) to surge 850% in fiscal 2026, and more than double in fiscal 2027.
Micron’s rapid earnings expansion and a modest valuation leave room for multiple expansion if Micron continues to execute.
The Bottom Line
Although Micron stock has corrected sharply from its highs, the underlying investment thesis remains intact. AI-driven demand continues to support robust growth in DRAM and NAND, while tight industry supply is expected to keep memory pricing favorable for several years.
At the same time, the stock trades at an attractive valuation despite expectations for exceptional earnings growth. Long-term strategic customer agreements further strengthen the outlook by improving revenue visibility and reducing cyclicality.
Taken together, these factors suggest the recent decline is more reflective of short-term market sentiment and profit-taking than any deterioration in Micron's fundamentals, leaving room for further upside over the long term.
Most analysts continue recommending a “Strong Buy” on Micron stock.
On the date of publication, Sneha Nahata did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
