Micron Technology stock could get a boost starting in December, when the memory-chip leader is likely to ramp up its stock repurchases.
The company will be free to execute major buybacks starting Dec. 9, with the expiration of restrictions stemming from Micron's participation in the federal government's 2024 Chips Act. It's possible that Micron could buy back $100 billion of stock in its current fiscal year ending in August 2027, or about 10% of its equity market value.
Micron's volatile shares have been under pressure, falling 8% in the past week to $833.50, including a nearly 6% drop Monday amid investor concerns about the duration of the current AI-driven upturn in memory chip prices.
A cautious outlook Monday from Japanese chip maker Kioxia, a maker of flash memory, chilled Micron stock. Kioxia shares were down 15% in Tokyo.
Micron stock is down 33% from its record high of $1,255 in June, but still has nearly tripled this year.
On Oct. 8, Micron boosted its stock buyback authorization by $33 billion to $35.2 billion in the wake of its strong earnings report for its fourth fiscal quarter ending in August, when its adjusted earnings per share rose ten-fold year over year to $33.42 a share.
When it reported its quarterly results on Sept. 30, Micron guided to about $38 a share in earnings for the current quarter ending in November.
The company said that, over time, it expects "to return 100% of our excess cash to shareholders."
That could usher in one of the largest repurchase programs in the stock market given that Micron is expected to generate $140 billion of free cash flow in its current fiscal year ending in August 2027, up from $59 billion in the just concluded year.
Micron received $6 billion of funding under the 2024 Chips Act during the Biden administration to help fund construction of new memory chip plans including one in New York state. That participation came with a stipulation that severely restricted Micron's stock buybacks basically to offset employee stock grants. As a result, Micron bought back just $650 million of stock in its recent fiscal year that ended in August.
That will change starting on Dec. 9, when Micron will get the ability for the ensuing three years to buy back stock roughly in line with its free cash flow.
"While Micron expects capex to increase meaningfully in FY27 (Citi mid 50's billion) to support technology transitions and manufacturing expansion, it still anticipates generating substantial free cash flow given the favorable industry backdrop," wrote Citi analyst Atif Malik in a client note last week.
"Micron authorized a record $33.2B share repurchase program recently, positioning the company to materially increase shareholder returns beginning December 2026 as CHIPS Act restrictions expire." he added.
Micron shares trade cheaply based on current and projected earnings. The stock trades for 11 times trailing earnings of $75 a share and for just five times projected fiscal 2027 earnings of about $175 a share.
In a client note last month, UBS analyst Tim Arcuri wrote that the Micron story is "now more about duration, the fundamental value of memory in an AI inference world, and capital return."
"Given free cash flow of 155B/225B/$205B for C2027/2028/2029E, respectively, this implies the repo here could be in a similar ballpark as NVDA despite having an 80% smaller market cap. Said differently, this now lays the path for MU to buy back 30% of the company over the next two years and potentially about half through C2029," he wrote.
If earnings estimates for Micron's current fiscal year pan out, the company could repurchase 10% of its current market value of nearly $1 trillion.
The boom in DRAM and NAND memory chip demand and pricing has also led to a huge improvement in Micron's balance sheet. The company ended its recent fiscal year with $73 billion in cash and equivalents and just $5 billion of debt. Net cash is equal to about 7% of its market value.
Memory chip makers now are flush with cash even as leading AI developers like Meta Platforms, Alphabet and Amazon.com take on debt to finance their data center buildouts that use Micron chips.
The situation has flipped and the better balance sheet now belongs to Micron rather than Meta and Alphabet, which formerly had cash-rich balance sheets and relatively little debt.
There's risk in the memory chip stocks given their run-up, but investors can take comfort that Micron likely soon will be providing support to its stock through what could be one of the largest stock buyback programs in Corporate America. That program is apt to continue barring an unexpected decline in chip prices.
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