After Gaining 800% in 1 Year, Wall Street Just Upgraded Micron to "Strong Buy" -- Unanimously. Here's Why.

It's fair to say that investors were skeptical heading into Micron's (NASDAQ: MU) latest earnings report. The stock had already gained more than 700% over the previous year, and had posted several blowout earnings reports in a row. In fact, on the day of Micron's latest earnings report, the stock was down significantly during the trading day before the afternoon announcement.

However, it's fair to say that Micron knocked it out of the park. Again. The stock soared to a new all-time high, and even after a brief pullback, it now has a market capitalization of nearly $1.3 trillion. This is from a memory company that was largely considered a boring, commoditized business just a couple of years ago.

Even with the incredible performance, Micron could still have plenty of upside ahead. In fact, most analysts who follow the stock think that's exactly what will happen. Here's a rundown of where Micron's business stands today, and where Wall Street sees it heading in the future.

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Micron's latest earnings were stellar

It's difficult to overstate how strong Micron's latest numbers are. In its fiscal third quarter, the memory giant reported $41.46 billion in revenue, nearly 350% more than the same quarter last year, and up a stunning 74% sequentially. On the bottom line, the company reported $25.11 in earnings per share -- nearly $5 more than analysts had expected. As you probably expect, data center revenue has been the key driver, and is now at a run rate of more than $100 billion annualized.

Micron isn't done yet.

In the current quarter, Micron is expecting $50 billion in revenue and $31 in EPS, representing sequential growth of 21% and 23%, respectively.

Perhaps most significantly, Micron announced that it is pivoting to strategic customer agreements (SCAs), which essentially commit customers to billions in future purchases. The company reported 16 of these along with its results, most of which have five-year terms running through the 2030 calendar year. The company reported cash deposits and related commitments of $22 billion from this initial wave of agreements, and 14 of the 16 agreements have a cumulative revenue potential of about $100 billion over their five-year terms.

This shift provides a win-win situation: supply visibility for Micron's customers, and much-needed revenue visibility beyond the next few years for Micron as it spends aggressively to increase capacity.

Analysts see even more upside ahead

Within a few days of Micron's earnings report, the stock received about two dozen analyst upgrades or new ratings, and no significant downgrades. Not only is Micron essentially sold out of its core products through 2027 at a minimum, but it now has long-term customer agreements that should keep revenue and cash flow growing for the next several years.

Is Micron stock still a smart buy now, even after the incredible ascent of its stock price? The average estimate calls for about $98 in earnings per share in the 2027 fiscal year, implying that Micron is trading at about 11 times forward earnings as of this writing. And this is for a company with sequential earnings and revenue growth rates exceeding 20%.

The billion-dollar question is whether this will be sustained. It isn't just that Micron is selling a lot of memory right now. It certainly is, but its capacity constraints have led to incredible pricing power. But as Micron's capacity increases or AI infrastructure spending cools off, what happens then? That's the risk you're taking by investing at these levels. If you decide to invest, approach your position size with that in mind.

Matt Frankel, CFP® has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.