---
ticker: "MU"
company: "Micron Technology, Inc."
date: "2026-10-16"
view: "Avoid"
fair_value: 676.71
price: 878.67
price_source: "Robinhood last regular-session trade; official 2026-10-16 close not yet in the feed when read (re-read 2026-10-17)"
price_time: "2026-10-16T19:59:59+00:00"
price_vs_fair_value: "+29.8%"
bear: 212.88
bull: 1574.5
exit_price: 610.64
p_price_justified: "20-50%"
restated: "2026-10-26"
method: "case-spread-2026-10-24"
original_fair_value: 654.3
original_view: "Avoid"
page: "https://alpha.dming.si/research/2026-10-16-mu-9"
---

# MU · Micron Technology, Inc. · Avoid

Research report as of 2026-10-16, unblinded. Page: https://alpha.dming.si/research/2026-10-16-mu-9

We value MU at $677 a share. The report's $878.67 price (Oct 16, 2026) was 30% above fair value: Avoid.

_Restated Oct 26, 2026 (method case-spread-2026-10-24); the report's original value was $654, Avoid._

| Lens | Range | Marks |
| --- | --- | --- |
| Our report | $213 to $1,575 | fair $677; original $654 |
| Our simulation | $455 to $1,215 | median $695 |
| Street targets (12) | $1,200 to $3,000 | average $1,589, median $1,500 |
| Price | | $878.67 |

Bands run from our bear to bull (the hollow mark is the original $654), our simulation's 10th to 90th percentile and the Street's low to high. Street targets forecast future prices, not value today. Market data, captured Oct 17, 2026.

| Figure | Value |
| --- | --- |
| Fair value | $677 |
| Price | $878.67 (Robinhood, Oct 16, 12:59 PM PT) |
| Five-year return | 4.8% (a year, at the report's price) |
| Bear / bull | $213 / $1,575 |
| Exit price | $611 (on Aug 28, 2031) |
| Confidence | 50% |
| Price against our scenarios | The price is justified in 20-50% of our scenarios (5,000 simulated outcomes, each drawing the uncertain drivers from ranges we chose: our judgement, not a measured chance) |

**What the price needs.** Any one of these, on its own, would justify the price:

- Normal markup over cash cost: needs 3.06x, we have 2.55x

_This text argues the original call. The current figures are at the top._

**Original call, Oct 16, 2026 (before the Oct 26, 2026 restatement)**

_As of 2026-10-16 · fully unblinded (written after the price was known) · written 2026-10-17_

- **Fair value today:** $654 per diluted share (cost of equity 10.06%)
- **Price:** $878.67, Robinhood last regular-session trade, 2026-10-16 19:59:59 UTC (official close not yet in the feed when read) → fair value 0.74x the price
- **Five-year exit price:** $530 on 2031-08-28 (long fade: returns drifting toward the cost of capital over many years; 10/20 years $518/$541)
- **Five-year return:** 3.1% a year at the price, payouts included
- **Purchase price:** $605 for the 12% hurdle (the yearly return we require)
- **Bear / bull today:** $219 (market 2.34, no floors) / $1,420 (market 3.0, 35% floored)
- **Case-weighted value:** $737 at our weights of 25% / 50% / 25%
- **Confidence:** Medium: 50% our subjective probability that the exit lands within ±20% of $530
- **Dated part:** $314 a share: FY2027-FY2028 free cash flow ($253) and today's net cash ($61)
- **Price needs:** $565 for Micron after the boom: a market normal markup of 3.11 with 15% floored (Micron's best cycle averaged 2.77; FY2018 peak 3.74), or 41% of volume floored
- **Avoid holds unless:** the market normal is 2.79 or more, or 26% of FY2031 volume is floored; a Buy needs 3.28
- **P(price justified):** 20-50% of our scenarios (subjective, not calibrated); simulated median $779
- **Key driver:** The market normal: 2.37 is $596, 2.75 is $730, 3.00 is $834
- **Street:** Street average target $1,588.85 (median $1,500, $1,200-$3,000), captured 2026-10-18 02:57 UTC; horizons and update dates absent; 7.6x the Street's own FY2028 EPS
- **Call rests on:** Micron earning about its FY2014-FY2025 average return on plant after 2028, plus the contract floors on the part of FY2031 the agreements still cover

**We rate Micron Avoid, close to a Hold: our fair value is $654 a share
against a price of $878.67 (0.74x). Only $314 of that price is cash we can
date, the free cash flow of the next two fiscal years plus net cash. The
other $565 pays for what Micron earns after the current memory boom, and that
is a judgment.**

**How to read the numbers.**

- **Cases.** The central case is our best estimate. The bear case is a
  severe but plausible bad outcome and the bull case the matching good one.
  The central case sets the view; the bear and bull show how far the value
  could move.
- **Markup and the market normal.** The markup is Micron's revenue divided by
  its cash cost of goods sold, so a markup of 2.55 means the memory sells for
  2.55 times its cash cost to make. The market normal is the markup we
  expect memory to earn on average after the shortage ends, outside the
  contracts below.
- **Floors and the floored share.** Micron's strategic customer agreements
  are take-or-pay contracts, mostly in price bands with floors. The floored
  share is the part of FY2031 volume sold at the floor price instead of the
  market. At the floor the markup is 4.39 (61% gross margin).
- **Fiscal years.** Micron's fiscal year ends about 1 September, so FY2031
  runs from September 2030 to August 2031.
- **The Hold line.** $747, the fair value at which our rule would move from
  Avoid to Hold.
- **HBM** is high-bandwidth memory, used with AI chips, and **CXMT** is the
  Chinese memory maker gaining share.

## What this report does

It revises our earlier report of 2026-10-16 (Avoid, $625), which stays on the
record ([link](https://alpha.dming.si/research/2026-10-16-mu-8)). This report answers two
questions Dong asked on 2026-10-17. Was the earlier report anchored too hard
on five specific years? Partly: the year prices turn moves value by about
$78, and the earlier report hid the part of the value we actually know inside
one judged number. And did it weigh what is really different this cycle? It
did not value the one hard difference, the contract floors. This report
values them and splits the price into a dated part and a judged part. The
answer moves only $29, because most of the contracts end before FY2031, the
year the exit price capitalises. The sector note on what is different this
cycle is `../sectors/memory/note.md`; its
sources, including the 84 memory bookmarks in Dong's vault, are in
`../sectors/memory/data/sources.md`.

## The price is $314 of dated cash and $565 of judgment

| Part | Per share | How sure |
|---|---|---|
| FY2027-FY2028 free cash flow ($145.0B, $176.3B), at 10.06% | $253 | Guided and contracted: Q1 guide, over 75% of FY2027 output committed, supply "much tighter" in 2027-28 [M] |
| Net cash at 2026-09-03 ($68.3B) | $61 | Reported [F] |
| **Dated part** | **$314** | |
| What the price pays for Micron after the boom | $565 (64% of the price) | **The judgment** |

([F] marks a reported fact and [M] a management claim.)

The judged part is a question about returns. On this model's path, the
central case earns 16.6% after tax on its plant in FY2031; Micron earned
15.4% (net income over net plant) pooled over FY2014-FY2025 and 24.3% in
its best cycle, FY2017-FY2022 [F, market data statements in our 2026-10-15 Micron
report]. The price needs about the best cycle, held as normal. That is not
an extreme ask, which is why the view sits near the line.

## What is really different this cycle, and how much we lean on it

The full ranking is in the sector note, section 2. In short:

- **Hard, and valued here:** take-or-pay agreements over 35% of revenue
  through 2030, three quarters with defined pricing, mostly in bands with
  floors; $32B of customer commitments, mostly cash; the CFO: "even at floor
  prices, we expect margins meaningfully above any prior cycle peak margins"
  (Q4 FY2026 call). We take the floor at the old peak, a 61% gross margin,
  which at this model's FY2031 cost is a cash markup of 4.39.
- **Hard, but short:** the agreements mostly end in calendar 2030. FY2031
  runs September 2030 to August 2031, so about 9% of its volume is inside
  today's terms; with extensions and new agreements we use 15% (bear 0%,
  bull 35%).
- **Real but partial:** HBM takes three to four times the wafers per bit
  and has three suppliers; demand comes from a few hyperscalers with long
  plans. These lift the market normal above Micron's long average, not
  above its best cycle.
- **Cutting the other way:** CXMT went from 7.6% to 9.5% of DRAM revenue in
  one quarter (TrendForce) and plans to double its wafers by 2028; SK hynix,
  Samsung, Micron and CXMT all add cleanrooms in 2028-30; customers already
  cut memory per server (Micron, Q4 call) and DeepSeek's newest model needs
  a quarter of the HBM for its cache.
- **Not leaned on:** "no line of sight to balance" (an outlook; the 2018 and
  2022 peaks each fell 34-80 margin points within about six quarters), and
  Street price paths that never fall (Citi's DRAM path rises to 2031;
  Bloomberg Intelligence's HBM path implies about $630B of HBM in 2030).

**Is a fall from 85% to 41% in three years unprecedented?** Not in speed:
Micron's quarterly gross margin fell from 47% to -33% in four quarters
(2022-23) and from 61% to 27% in five (2018-19). What is new is the height
it starts from.

## Three cases: $219, $654 and $1,420

| | Bear | Central | Bull |
|---|---|---|---|
| Market normal markup | 2.34 (latest cycle) | 2.55 (between Micron's two histories) | 3.0 (FY2022) |
| FY2031 volume at the floor (4.39) | 0% (renegotiated in a glut) | 15% | 35% (renewed toward management's 50% goal) |
| Blended FY2031 markup | 2.34 | 2.83 | 3.48 |
| FY2031 gross margin | 22.4% | 40.6% | 52.8% |
| FY2031 return on plant | 1.8% | 16.6% | 30.2% |
| Fair value today | $219.18 | $654.30 | $1,419.97 |
| Exit price 2031-08-28 | $38.83 | $530.03 | $1,632.73 |
| Purchase price | $203.92 | $605.18 | $1,309.37 |
| Return a year at the price | -21.0% | 3.1% | 22.1% |

The bear holds a trough as the normal forever (1.8% on plant), which is
harsh; it is the case where the new capacity overshoots and the floors are
renegotiated. FY2027-FY2028 are the same in every case (the path from our
earlier Buy report of 2026-10-16, [linked here](https://alpha.dming.si/research/2026-10-16-mu-7),
which the Q1 guide and the agreements date).

## The simulation's median ($779) sits above our central case ($654)

The simulation (5,000 draws, `odds.json`) has a median of $779 and a mean
of $791, against the central $654; 29% of draws are at or above the price.
The gap is ours by design: both judged inputs have longer tails up than
down. The market normal runs from 2.1 to 3.74 around 2.55, because Micron's
markup has a hard floor in practice (its latest cycle averaged 2.34) but has
reached 3.74; the floored share runs from 0 to 45% around 15%, because the
agreements can be renewed but cannot go below zero. The central case is
our most likely single path; the median says the value is more likely
above it than below. The two straddle the Hold line ($747): the view rule
uses the central case and reads Avoid, but this is close to a Hold, and a
reader who weights the upside tails more than we do will reach one.

Our 10th-90th range ($602-$1,002) is 22% as wide as the Street's targets
($1,200-$3,000). We did not widen it: $314 of the value is dated cash in
every draw, and the Street's spread is about whether peak earnings are
normalised at all, which we do not treat as uncertain in that direction
(a judgment we disclose).

## Sensitivities (central, one at a time)

| Change | Fair value |
|---|---|
| Market normal 2.37 / 2.75 / 3.00 / 3.25 | $596 / $730 / $834 / $939 |
| Floored share 0% / 25% / 35% / 50% | $549 / $736 / $826 / $963 |
| Prices turn a year later (FY2030) / earlier (FY2028) | $732 / $587 |
| Capex kept on the earlier report's path, no bend | $622 |

## Bridge from the earlier report

| Step | Value |
|---|---|
| Earlier report's central (normal 2.75 for everything, contracts folded in) | $625.43 |
| Take the contract lift out of the market normal (2.75 to 2.55), add 15% at the floor | $654.30 |

The two steps are one change: the contracts move from a reason for the
normal to an explicit input, so they count once. The rest of the engine is
unchanged and the earlier report reruns at $625.43 (`output.txt`, last
line).

## Our $654 is 0.41x the Street's target, and the gap is peak earnings never normalised

Our $654 is 0.41x the Street's average target of $1,588.85 (market data, 12
targets in the last quarter, horizons absent). Running the Street's own
revenue through our engine (`street_path.txt`), then letting prices reach
our blended normal of 2.83 by FY2031:

| Step | Value |
|---|---|
| This report's central | $654.30 |
| Street revenue through FY2028 instead of ours | $642.44 (-11.87) |
| Street revenue through FY2029 | $685.65 (+43.21) |
| Street revenue through FY2030 ($497.9B, 8 analysts) | $816.29 (+130.64) |
| The same, ending at 3.11 / 3.50 | $938.56 / $1,116.07 |
| Left to the Street's average | $772.56 |

So the Street's revenue path is not the gap: even its FY2030 revenue,
which rises 49% in a year, is worth $816 if prices then reach our normal.
The gap is the Street's targets (7.6x its own FY2028 EPS) valuing peak
earnings with no normalisation after them. We do not adopt that; it is the
same error our earlier Buy report of 2026-10-16 made, which the report we
revise corrected.

## Why the other side could be right

- The agreements are a new kind of contract, backed by cash. If buyers keep
  paying the floors past 2030 to secure supply, a floored share of 41%
  justifies the price, and management's goal is about 50% of revenue under
  agreements, three quarters priced.
- Micron's best cycle (24% on plant) is the right base if HBM and three
  suppliers make memory less of a commodity than it was in 2014-2025.
- Prices may turn later than FY2029: Citi's DRAM path rises every year to
  2031, and Micron sees 2028 tighter than 2027. A year later is +$78.

## What would prove us wrong

The full list is in `record.json`: the floors disclosed past 2030 (up),
floors amended in a price fall (down to about $549), prices still rising
after Micron's ID2 fab and SK hynix's Yongin Y1 fab start (later turn),
CXMT's share past 12% with 420k wafers in 2027 (lower market normal).

## Review: no independent reviewer, so a self-check

No independent reviewer read this report: Dong asked our research lead to do
this work alone. We checked it ourselves against the standard checklist for
research reports:

| Question | Result |
|---|---|
| Is a peak held as the normal? | No: FY2031 central markup 2.83 against a FY2014-FY2025 maximum of 3.74; supply grows while prices fall |
| Is a decline assumed without a date? | Disclosed: the FY2029 turn is assumed; the capacity dates are dated (sector note T2-T3) |
| Is one downside counted twice? | Fixed from the earlier report: the contracts were a reason for the normal and are now an input, counted once |
| Are the top inputs sourced? | Floor: Q4 call, primary. Floored share: our arithmetic from the call. Market normal: Micron statements. CXMT: trade press |
| What does the price need? (reverse underwrite) | A market normal of 3.11, or 41% floored |
| Not done | Independent review; floor levels (undisclosed); a year-by-year floor in FY2029-FY2030, where the market markups sit near or above it |

## Files

`model.py` → `output.txt` (cases, two parts, grids); `market.py` →
`market-output.txt`; `street_path.py` → `street_path.txt`; `inputs.json`
holds every judgment with its basis; `assumptions.md`; `drivers.json` and
`odds.json` for the simulation.