Micron Summary:<\/strong><\/em> It would be pointless to review all the key numbers from MU’s earnings release, but needless to say it was a blowout quarter which exceeded even the most aggressive analyst estimates.<\/p>\nThat being said, as analyst’s lift numbers, eventually the sell-side consensus shown above will outrun the memory cycle.<\/p>\n
Just looking at a gross margin of 84% and an operating margin of 81% for fiscal Q3 ’26, I wonder how much improvement is left in those key metrics, both for Q4 ’26 and then into fiscal ’27.<\/p>\n
Sanjay Mehrotra appears to be doing everything he can with the SCA’s to help diminish the memory cycle. Sanjay’s was Sandisk’s CEO from 1988 to May ’16, and he saw what memory did in the late 1990’s and then the 2000 downside, so he is all too familiar with what’s in front of him today.<\/p>\n
The SCA’s could be a key and positive element to MU’s story not just in ’26 but through the next 2 years. Sanjay may have put in place a customer agreement structure that helps stabilize margins, or at least helps support margins until supply and demand take over.<\/p>\n
Just to be clear to readers, i.e. full and fair disclosure, this blog has no long positions in Micron today, or in the semiconductor ETF (SMH), but for clients, most of not all clients are long the iShares Emerging Markets ex-China ETF (EMXC), which holds 38% it’s market cap weight (top 3 holdings) in Taiwan Semiconductor, Samsung, and Hynix. Per one source (can’t recall which one) Samsung and Hynix now represent 40% of South Korea’s equity market capitalization. Also per Bloomberg’s scrolling headlines on July 4th, the date of this article, Samsung recently announced that they are increasing memory prices 20%. (The date of the Bloomberg headline is unknown but my assumption is that this announcement was made over the July 4th weekend in the US. There is no such supporting press release on Samsung’s global newsroom.) (Long two very small positions in INTC in personal accounts, hoping INTC will re-test the mid $70’s.)<\/p>\n
As someone who lived through the cycle in the late 1990’s, watching MU trade up to $97 in early August, 2000, and then be trading at $30 by Thanksgiving of that year, personally, there is little interest in living through that again, after 31 years managing money.<\/p>\n
Although the changes MU and Sanjay Mehrotra are making to try and ameliorate the memory cycle are quite encouraging, memory is still a commodity business, with with incredible peaks and valleys around supply and demand, and the nature of MU’s capital intensity (i.e. fab construction) which makes it similar to an the airline industry, the auto industry, and some industrial niches, I’m not yet convinced that Micron can go long periods of time (like a decade) earning a return-on-invested capital that exceeds it’s cost of capital.<\/p>\n
None of this is advice or a recommendation, but only an opinion. Past performance is no guarantee of future results. Readers should make their own decisions around both portfolio volatility and security selection. None of the above information may be updated, and if updated, may not be done in a timely fashion.<\/p>\n
Thanks for reading.<\/p>\n
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