Micron reports fourth-quarter earnings on Sept. 30, and one analyst says the memory chip maker's cheap valuation undervalues its position in an ongoing supply shortage. Management doesn't expect the shortage to ease until after 2027, leaving Micron room to keep raising prices.
Micron shares rose 6.10% as the company heads into its fourth-quarter earnings report on Sept. 30. Motley Fool contributor Keithen Drury says the date could mark a turning point for the stock. Investors want to know whether the memory chip shortage still lets Micron keep pushing prices higher.
AI-driven demand keeps supply tight
Data center build-outs by AI hyperscalers have consumed the available memory chip capacity, according to Drury. Micron's management said during its third-quarter results that it doesn't see the shortage easing until after 2027, leaving the company well placed to keep benefiting from higher prices in that window.
New capacity is still years out
Micron is building new production facilities, but Drury notes they won't be running at full capacity until late 2027 to 2028. It's unclear whether that new supply will meet AI hyperscalers' demand or instead push the memory chip market back toward normal levels. That uncertainty, Drury argues, is part of why the market prices Micron so cheaply today.
A cheap stock heading into a catalyst
Micron trades at just six times forward earnings, a valuation Drury calls incredibly cheap given the pricing backdrop. He argues the market has taken one of the most negative stances possible, and that reality often lands somewhere between the bull and bear cases.
According to Motley Fool: "I'd be surprised if Micron reports anything but spectacular results", Drury wrote, pointing to the company's recent quarterly track record.
Source: The Motley Fool
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