Micron Stock Looks Cheap After a Record Year: Time to Buy?

Micron Technology (MU) just wrapped up a record fiscal year. On Sept. 30, the memory chip maker reported fiscal 2026 revenue of $133 billion and adjusted earnings of $75.52 per share, a massive jump from $8.29 a year earlier. That's the kind of growth most companies can only dream of.

Yet the stock has fallen since then. As of Oct. 28, MU closed about 13% below its earnings-day close, and it trades at a forward price-to-earnings (P/E) multiple of just 5.5. For context, the S&P 500's forward P/E is around 19. So why is Micron so cheap?

Investors have seen this movie before. Memory booms have historically ended when new supply flooded the market and prices fell. The low multiple suggests the market is already pricing in a bust.

But Micron isn't sitting still. It has signed 26 long-term strategic customer agreements (SCAs) that lock in demand. Buyers must take set volumes or pay anyway, backed by $32 billion in customer financial commitments. These agreements cover over 35% of expected revenue through 2030, providing some stability.

Meanwhile, the memory boom is filling Micron's coffers. Adjusted free cash flow hit $33 billion last quarter and $62 billion for the full year. That cash is funding capacity expansion: about $27 billion in capital expenditures in fiscal 2026 and plans for $25 billion in the first half of fiscal 2027 alone. The risk, of course, is that new supply eventually outpaces demand.

Micron's stock price hinges on whether the current memory boom turns into a bust. At 5.5 times forward earnings, the market is betting on a downturn. If that happens, earnings could fall sharply, and the stock could drop further. But if the boom continues, the stock could prove genuinely cheap and surge higher.

The key is the balance between supply and demand. Micron's long-term contracts cover only about 35% of expected revenue through 2030, leaving up to 65% exposed to market prices. So even with these agreements, Micron is still largely at the mercy of memory prices.

Two metrics will show whether the shortage is ending: DRAM prices and days of inventory. DRAM accounts for roughly three-quarters of Micron's revenue, and prices rose in the high teens last quarter, reflecting strong demand and tight supply. Days of inventory rose nine days to 129, but management expects it to decline as supply stays tight.

If days of inventory continue to rise while prices stall, that signals an excess of supply—and the skeptics will have been right. But if prices keep climbing and inventory days come down as management expects, the stock could prove cheap and continue to surge next year.

For investors, this is a classic cyclical stock dilemma. The low valuation offers a margin of safety, but the risk of a downturn is real. Watching those two metrics closely will be crucial.