Micron (NASDAQ:MU) stocks are struggling this month, even as the S&P 500 hits a record high. The stock remained stuck in a range despite strong revenue growth and guidance from its latest earnings report. It was recently trading at $1,040, about 18% below its high of the year.
Micron Technology Sees Strong Growth
Micron and other major memory companies are holding back this month, even after reporting strong earnings. In a recent report, Micron said its revenues jumped 379% to $54.2 billion, with the annual figure reaching $133 billion. This growth is driven by its DRAM business, which generated $39.8 billion during the quarter.
Micron’s gross margin soared to 87%, while its net income soared to $38.4 billion. Management also expects growth to continue, leading to revenue of more than $61.5 billion in the first quarter against operating expenses of just $2 billion.
Despite this growth, Micron is one of the cheapest stocks on Wall Street. It trades at a forward P/E ratio of 7, well below the S&P 500’s 19.1 multiple. The same is true for other memory makers like Samsung Electronics, SK Hynix and SanDisk.
In addition to its revenue growth, Micron has a major catalyst. Analysts expect him to announce a significant stock repurchase in December, when restrictions imposed by the CHIPS Act end. Based on its valuation and the $73 billion it has available, it could announce up to $50 billion in buybacks.
Micron Stock Struggled Amid AI and Cyclical Nervousness
There are two main reasons why Micron stock has faltered. First, there are still significant concerns about the AI industry, with some analysts warning that the bubble will soon burst. Such a move would have a significant impact on businesses across the sector.
Second, investors are concerned about the cyclical nature of the memory sector. Historically, periods of high memory demand are usually followed by periods of low demand and saturation. A good example of this is what happened in 2023, when Micron’s revenue fell to $15.4 billion from $30.7 billion a year earlier.
Micron and other companies have moved to offset these concerns by entering into long-term agreements with their customers. These transactions include floor and ceiling prices, which give it future visibility on its activity. Management stated:
“These multi-year purchase or payment agreements enhance our long-term supply planning and enhance the sustainability and predictability of our strong financial performance.”
Top analysts believe Micron stock is poised to explode. Gil Luria of DA Davidson recently increased his target from $2,100 to $3,000, while Quinn Bolton of Needham increased it to $1,650. Benzinga data shows the average target among analysts is $1,463, up 42% from the current level.
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