원문 보기
Micron reports earnings tomorrow, but I think this could be one of the most important reports from this company in a very long time. Because the question is no longer whether the demand for memory is high. The question is how high it has become and whether Wall Street continues to underestimate Micron's earnings in the event of further price increases.
I reviewed my own estimates of what Micron might report tomorrow and, most importantly, what the next few quarters might look like. But there is one indicator from Korea that is now giving us a rather interesting clue as to where we are headed. So, let's start with this. During the third quarter, well, they report for the fourth, but anyway, for the calendar third quarter, we saw a rapid increase in Korean DRAM prices.
And also, moving forward, even NAND prices in August. So, these two graphs were taken at different times, so you can see that DRAM export prices increased, and then in August NAND prices went straight up. There is an opinion that the situation with DRAM prices is very similar. Maybe not as sharp, but prices for Korean DRAM and NAND are showing rapid growth.
Yes, these are South Korean prices, they are not necessarily Micron, but they are similar competitors supplying similar products to identical customers. These are companies like Nvidia, AMD, Amazon, and Google —the main buyers of these products. I also wanted to look at what Elon said about memory prices, because one of the main concerns is that this business is cyclical, and the question is not just cyclical , because it is, but how long will this cycle last?
After all, many assume that there are about 18 months left. Elon has something to say about this , and he voiced it during a transcript of SpaceX's second-quarter report . Look at the speed at which logic circuits and memory are produced. There is always a limiting factor to consider , and right now that factor is memory.
Memory production is growing at about 20% per year as new manufacturing facilities come on stream and they are also able to scale current plants. So it's not just about building new plants, which would be horizontal scaling, they are also able to produce more at existing plants. Normally, for any large, mature industry, this would be incredibly fast and impressive.
But ask yourself, is demand growing by 20% per year? No, demand is growing faster—about 200% per year, maybe even more. So, if demand is growing much faster than supply, the basics of economics suggest that the price is rising. It is not decreasing. If you look at what Micron forecasted for next quarter, they expect significant growth— around $50-51 billion in revenue.
Gross profit margin is at 86%, which is significantly higher than in previous quarters , and earnings per share are around $31, maybe $32 per share. When you look at Wall Street expectations, they are predicting around $51-51.2 billion. The upper limit of Wall Street's forecasts is 59 billion. So there are people who believe that the figures will be much higher than even Micron predicts.
And this leads to continued high growth rates until we see a downturn. And a recession does not mean less growth, but a slowdown in the growth rate. So, we still expect growth. It's easier to show growth, say, this quarter, relative to a base of 11 billion than relative to last quarter's base of 41 billion.
It's hard to make a 4.5x jump from $41 billion . Therefore, my revenue expectations are approximately $55-56 billion, which is approximately 7-9% higher than Wall Street forecasts. This only applies to revenue. When we look at earnings per share (EPS), expectations are $31.59 . That's 59 cents higher than Micron had stated in its previous report.
Note that that report was written before the parabolic movements in DRAM and NAND prices that occurred in July, August, and even September, according to reports, a jump of 8% to 20% per month was expected. This is also factored into Micron's expectations and their future projections, where they expect $35 for next quarter.
My expectations are $34 profit per share. Let me remind you, I'm very conservative with these numbers, and I'll show you why, but the beat on Wall Street expectations is 7.6%. Normally it would be extremely, just extremely aggressive. My problem is that Wall Street's ability to forecast Micron's sales was simply flawed.
As you can see, they consistently exceed Wall Street expectations. I used to say that the outperformance is 7 to 9%, but according to the latest forecasts, when revenue growth started, we saw an outperformance of 24%, 18% on EPS, 41%, 24%, and now we are still seeing parabolic price growth. They don't stand still.
They are able to increase new supply volumes every quarter. We will see higher overall sales volumes, but the average sale price is what people really pay attention to. I actually think my estimates are quite conservative compared to some people's expectations. And besides, there are a few more points that, in my opinion, are currently being overlooked when talking about Micron.
The total amount of cash has increased significantly when you have that level of growth. This happens on a quarterly basis . Increasing cash from $10 billion to $26 billion in 6 months is, well, first of all, unusual. Even more unusual is that this happened without diluting the shares and in parallel with the payment of debts.
Most often, when you see companies' cash levels increase so dramatically, it usually means that their debts have also increased. The situation is different here. This is happening against the backdrop of their debt repayment. And I think the main focus for Micron going forward is that debt will come down to a very, very nominal level while cash continues to grow a little bit.
But, as Micron said, they don't expect to accumulate an incredible amount of cash. Currently, due to restrictions on chips imposed by the Biden administration, Micron is not allowed to repurchase shares until December 9th. After December 9, they will be able to buy back shares. UBS actually prepared a report on this.
They said, "Hey, we'll probably see about 40% of the free float being bought back by the end of 2028." 40% of shares outstanding. So, this gives an immediate boost to Micron's overall stock price without affecting market share. This means that each share you own in that company represents an ownership stake in that business.
But if they withdraw, say, for simplicity of calculation, 50% of the outstanding shares, your ownership stake in the company will double. If you look at it as a pie chart, everyone's share becomes a little bigger. But 40% is no joke. So, if you look at what drove Nvidia stock up yesterday, they just announced a $150 billion buyback program.
This represented approximately 4 % of their outstanding shares, and the company grew by approximately 3%. If we were to buy out 40% of Micron, taking advantage of this supply constraint and pricing advantage, the price could skyrocket very high. And one of the biggest objections I hear to buying Micron at these prices is that the price has already gone up quite a bit.
If we look back, say, to May 2025, about here. It was $97 per share. From $97 a share, we are now at over $1,050 at the time I took the screenshot, which was last night. So, following yesterday's closing. Looking at it today, from a valuation perspective, you would expect to pay a lot more for this business.
And I do n't mean per share, but per profit. Price/earnings ratio. So we look at the future of this business and say, "Hey , when you paid $ 97 a share for this business , the company had a forward P/E of about seven and a half." Today it is actually lower. The company is cheaper on a forward P/E basis at $1,080 due to rising earnings.
This means that the growth in earnings and earnings expectations is actually slightly more than it was on a per share basis when the price was $97. And you see these significant drops because that's actually a very good sign. This means that profits turned out to be much higher than people expected, and the company did not have time to adjust prices quickly.
And you see it all the time . There's a big drop here, then another significant drop in February. These are all income statements. Wall Street overvalues the company, and after that, price- to-earnings expectations fall. If we went back and looked at these underlying earnings expectations, they were constantly being revised.
And it looks like if we go back to growth expectations, they haven't changed their minds too much. If you look at Micron's revenue and EPS expectations, full year EPS, even from September 22, 2026 to today, the 2028 expectations went from 171 to 181. The 2026 expectations went from $73.44 to $73.88.
They are still showing growth in line with their projections. Then, when we move on to income, the situation is similar. We see that very recently the 2027 projections of 241 billion and 2028 projections of 269 billion are now 250 and 285. So we continue to raise these expectations, and you see all of these projections becoming positive; Whether it's over the last month or the last 3 months, expectations for this company have been consistently revised upwards .
My question is: What is the likelihood that Micron will beat expectations again and raise forecasts? We don't see a slowdown in the use of AI, on the contrary, we only see a rise in expectations that we will need new processors, new GPUs, and even more—in the last 3 months, there was a report that Nvidia GPU lead times have increased from 6 to 40 weeks.
So even the largest manufacturers in the world are now experiencing a bigger supply shortage than when Micron first published that $50 billion-plus report . If you want to go even further, it's worth taking a look at some of the big players. So we turn to South Korean prices. Let's look at some South Korean companies.
One of the biggest, if not the biggest, is Samsung. Samsung is now actually reporting that they have long-term agreements for 10 years, and new 5-year contracts are also being signed . But since they started signing these one-year agreements, the deadline has also moved forward by a year, because today they are signing new 5- year contracts that will be valid for more than 5 years.
They don't have a single completion date. The date has now been pushed back another year. So expectations about when this growth will peak are constantly changing, and that's just one of the things that I find so interesting about memory, and that's why I look at these Wall Street forecasts and see such a massive decline.
And I'm just wondering , are we confident in these expectations of 51 billion or 57 billion, or are we going to have to revisit them tomorrow and say, "Hey, in August 2027 it's probably going to be somewhere around, let's say, $73 billion," because the supply shortfall hasn't gone down. "There is no TSMC in memory that would unlock all this potential new offering." And as Elon said, while the supply is expected to come in mid- to late-2027, it could only unlock 20% more supply.
We are not growing by 20%. Even if supply increases, the margin decreases slightly, say from 86% gross profit to 60%. Incredible drop in average selling prices, how will this affect Micron? Will companies like Nvidia say, "Okay, we'll just take all these savings and get higher margins for ourselves?" AMD may make a different decision.
They can increase the use of memory, whether it's DRAM, LPDDR, any of these solutions, HBM, and say, "Hey, if we can afford more, we'll buy more." Which will force AMD, Broadcom, and Nvidia to play the " prisoner's dilemma" and buy more and more memory over time. Yes, the biggest problem is that over time, a breakthrough in the field of memory may occur.
Some reports suggest that technologies such as 3D DRAM will appear as early as 2031. This will significantly reduce costs and speed up achieving the same level of memory, but much cheaper and with smaller factory floor space requirements. So, there are solutions that can radically change the rules of the game.
But it's 2026 now, and the number of shares available at a forward P/E of seven times makes this an exceptional opportunity. If this only happens in 2031, how many shares will be outstanding? If investors don't want to buy the company, can Micron buy back , say, 40, 50 or more percent of its own stock?
Going back to where I started: my expectations are conservative, but less conservative than Wall Street. I expect revenue to be around $55-56 billion and earnings per share (EPS) to be around $34. Slightly above Wall Street expectations, a 6-7% beat, nothing extraordinary , but still optimistic. Here's why I'm buying these stocks: I believe that even beating expectations by a few percent will push them higher if they improve on their forecasts, if those forecasts remain high, and if long-term contracts turn out to be better than expected, which is what actually caused the stock to fall last quarter.
The report should be very good. But let's see if I'm right or not, tomorrow after the close of trading, I'll be streaming.
Comments 0