Micron exceeded analyst expectations on both revenue and earnings for its fiscal fourth quarter, yet the stock rose only modestly the next session. Analyst estimates for fiscal 2028 show growth slowing sharply, reviving investor worry about the memory-chip industry cycle.
Micron's stock barely moved after the chipmaker beat Wall Street's revenue and earnings targets for the fiscal fourth quarter, which ended Sept. 3. That muted response points back to an often-overlooked risk: the industry cycle that shadows Micron's business.
The numbers themselves were strong. Quarterly revenue more than quadrupled, and for fiscal 2026 Micron reported $133 billion in revenue, far above the $37 billion it posted in fiscal 2025. Net income reached $85 billion, about ten times the $8.5 billion in profit from the prior fiscal year.
A cycle that always turns
Memory chips are a commoditized product. For now, demand runs ahead of supply, giving Micron tremendous pricing power. However, seasoned chip-stock investors know these trends eventually reverse, and when supply catches up with demand, Micron will have to cut production and slash prices to clear inventory.
Analyst estimates already hint at that shift. They project a 107% increase in revenue for fiscal 2027. But that pace is forecast to fall to less than 8% in fiscal 2028, a deceleration that could mean the next downturn begins in the foreseeable future, and investors may need to brace for a sell-off sooner rather than later.
Why the low P/E ratio may be deceiving
This fear weighs heavily on Micron's valuation. The stock trades at a P/E ratio of just 15 and a forward earnings multiple just above 6, numbers that make it look wildly cheap. Still, a 90% drop in profits — a conceivable scenario given past industry cycles — would push that earnings multiple to 150 and the forward P/E ratio to almost 60 at current prices, exposing the valuation risk the current multiple masks.
That appears to render Micron's deceptively low P/E ratio meaningless, and it could indicate investors need to turn cautious on the stock.
Source: Fool
Trading involves risk.
Risk Disclaimer
