Should You Buy Micron Before Sept. 30? 1 Number Could Send the Stock Soaring

Key Points

• Micron has been one of the biggest winners from the AI boom, thanks to the memory shortage.
• The stock's trajectory depends, in large part, on when the memory cycle peaks.
• Micron could give a key update on 2028 market dynamics in next week'searnings call
• 10 stocks we like better than Micron Technology ›

Micron (NASDAQ:MU) is set to report fourth-quarter earnings after the bell on Sept. 30.

The memory chip giant has been one of the most closely watched stocks in the AI boom after soaring more than 1,000% as AI compute demand has sparked an unprecedented shortage of memory. As a result, revenue and profits for Micron and its peers have skyrocketed.

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As one of the three leading memory chip companies in the world, along with Samsung and SK Hynix, Micron, the only U.S. stock in the group, has emerged as a popular choice for investors who want exposure to the bottleneck.

The stock is likely to swing big following its earnings report, as its results have been difficult for Wall Street to predict, and because the stock is historically volatile due to the cyclicality of memory.

Image source: Getty Images.

The 1 number to watch when Micron reports Q4 earnings

Investors will be tracking key numbers from the quarterly report, like revenue, adjusted earnings per share, and gross margin, and Micron's guidance will help determine where the stock goes next.

However, I think the most important factor in the report will be commentary on market dynamics, particularly for 2028. Yes, 2028, not the company's financial figures, will be the most important number to watch.

2028 is key because the company has already said that its high-bandwidth memory, specifically HBM3E and HBM4, are fully booked through calendar 2027. That means the company's results through the next calendar year are more or less predictable. What's still unknown is how supply and demand dynamics impact the company's performance in 2028 and beyond.

On the Q3 call in June, management said that HBM demand had begun to stretch into 2028, and it also expects new capacity to come online, meaning 2028 could be another bumper year if memory prices remain elevated.

The future outweighs the present for Micron

Where Micron stock goes from here largely depends on investor perception of how long the AI-driven boom will last. That's what's unknown about the stock. Investors are already well aware that the company will make huge profits in fiscal 2027 and 2028, but the cycle will eventually peak. What matters is whether that's five years away or more, or whether it's just two or three years away.

Management commentary on 2028 will give investors the biggest hint about whether the peak of the cycle is getting pushed further out. If we hear a positive update on 2028 or more commentary on tight market dynamics, I think that will push the stock higher. Without that, a gain is less likely.

Micron is insulating itself from the cyclical downside

Micron has already taken steps to protect itself from the other side of the cycle. It has begun signing strategic customer agreements (SCA), most of which last five years. These agreements lock in a price range and are structured as take-or-pay agreements with minimum purchase commitments, protecting Micron from a potential bust in the cycle. The agreements it signed through the third quarter covered about 20% of DRAM volume and 33% of NAND volume, indicating it's protecting a significant share of its business.

While Micron is taking prudent steps with the current memory windfall, it remains bullish on long-term demand, pouring $100 billion into a new manufacturing facility in upstate New York, which is expected to begin producing chips in 2029 or 2030.

Overall, Micron is on solid footing heading into the report. The stock looks cheap relative to near-term earnings forecasts, and it has risen in recent days from a potential surge in CPU demand, driven by Meta Platforms' breakthrough launch of its Muse AI personal agent.

Given those factors, I think the stock is a buy heading into the report, but its commentary about 2028 could be the biggest determinant in where Micron stock goes after the earnings report and over the coming months.

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Jeremy Bowman has positions in Meta Platforms and Micron Technology. The Motley Fool has positions in and recommends Meta Platforms and Micron Technology. The Motley Fool has a disclosure policy.