MW Micron's stock is spectacularly cheap, as these numbers show
By Britney Nguyen and Philip van Doorn
The memory-chip stock stands out when factoring in its inexpensive valuation, strong growth profile and sky-high margins
Micron's stock trades at a forward price/earnings ratio of 5.6, which is one of the lowest P/E valuations among the components of the S&P 500.
Micron Technology's stock was already cheap heading into Wednesday's earnings report, and it's even cheaper in the aftermath.
As of Thursday's close, Micron's stock $(MU)$ was trading at 5.6 times the consensus 12-month estimate for earnings per share, based on analysts polled by LSEG. That compares with a forward price-to-earnings multiple of 7.2 as of Tuesday.
The change reflects how Micron's stock declined about 4% in Thursday trading, while earnings expectations jumped. The rolling 12-month forward earnings consensus for Micron was $79.95 late Thursday, according to LSEG, compared with $74.92 on Wednesday and $63.83 on Tuesday.
The stock is now one of the least expensive in the S&P 500 SPX. On the basis of forward P/E, only about 10% of stocks in the index are trading below 10.0, and only three - Charter Communications $(CHTR)$, Global Payments $(GPN)$ and Viatris $(VTRS)$ - trade at forward P/E ratios lower than that of Micron.
The memory-chip maker reported sales of $23.86 billion for its fiscal second quarter, up 75% from the previous quarter and up threefold from the year-earlier quarter. Profit results were even more spectacular, with adjusted quarterly earnings per share increasing 155% sequentially and nearly 700% on a year-over-year basis, to $12.20.
The company has benefited from robust demand from artificial-intelligence data centers. Just a handful of companies make memory chips, and they've been reluctant to add manufacturing capacity out of fear that demand will eventually slow down in the typically cyclical market. Prices for memory chips have boomed as a result, significantly increasing profits for Micron and its peers.
See more: Why Micron's stock is sliding despite Nvidia-like earnings performance
Analysts expect the supply-and-demand imbalance in the memory market to persist for years. But Micron and rivals are slowly moving to add more manufacturing capacity, which will boost industry supply down the road. Increased supply risks are cutting into pricing power and compressing the company's sky-high margins. Micron expects to make $25 billion in capital expenditures this fiscal year as it expands manufacturing capacity - and even more next year.
"Memory is the most cyclical part of the semiconductor industry," and there are no signs that those fundamentals have changed, Richard Windsor, founder of research firm Radio Free Mobile, wrote in a note on Thursday.
He said he expects an eventual downturn in the memory market. "Micron needs to have a rock-solid balance sheet and war chest to ride out the volatility without meaningfully hurting its long-term business," he wrote.
As Micron is sold out for the year and will likely soon start locking in deals for next year, Windsor predicted that the short-term picture is good for the company. But Micron's next report could send earnings estimates even higher, which he noted could keep the stock's P/E below 10.
BNP Paribas analyst Karl Ackerman wrote in a Wednesday note that some investors have been worrying about "unintended consequences," since half of the memory market looks like it's being propped up by data center demand. Micron, for instance, is in the midst of high-volume production of its next-generation HBM4 for use in Nvidia's upcoming Vera Rubin platform.
But Ackerman said the risks around data-center concentration and potential margin contraction "appear manageable."
Micron's gross margins rose from 56% in the November quarter to 74.4% in the February quarter, and the company sees them rising to 81% in the May quarter.
That sets Micron up to join an exclusive club. When looking at companies' last-reported fiscal quarters, only 34 S&P 500 components had gross margins of 80% or higher.
Micron's margin performance is more impressive because the company is an equipment manufacturer. Many of the companies in the elite 80%-plus group are pharmaceutical, software or financial-services businesses. Micron's high margin underscores the company's ideal situation, with robust demand for memory components supporting the build out of generative AI.
Don't miss: Micron's stock gains officially carry the company into an exclusive club
Among the 21 companies in the S&P 500's information-technology sector with quarterly gross margins above 70%, only three are hardware manufacturers: Micron, Nvidia (NVDA) and NetApp $(NTAP)$. Nvidia's gross margin for its most recent reported quarter was 75% and its stock closed Thursday at a forward P/E of 20.2. NetApp's gross margin was 70.4% and its stock closed at a forward P/E of 12.3 on Thursday.
So Micron stands alone with such a high gross margin and such a low forward P/E valuation.
-Britney Nguyen -Philip van Doorn
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March 20, 2026 08:43 ET (12:43 GMT)
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