Should You Buy Micron Stock Under $1,000?

Despite delivering exceptional results in its fiscal third-quarter earnings report, shares of Micron Technology (NASDAQ: MU) have slid roughly 11% since the company's earnings release on June 24. The contrast between strong business fundamentals and the market's reaction is a little puzzling.

While near-term sentiment on Micron appears to be turning cautious, the company's underlying momentum and valuation profile suggest the sell-off is more a reflection of broader sector dynamics as opposed to a fundamental deterioration at Micron itself. This disconnect creates a unique opportunity to buy Micron stock at more attractive levels.

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Why is Micron stock plummeting?

A number of factors are weighing on Micron following the company's recent earnings report. Namely, increased capital spending from key competitors Samsung and SK Hynix have raised concerns about potential future supply and pricing pressure in the DRAM, NAND, and high-bandwidth memory (HBM) markets. Sometimes investors interpret competitors' aggressive investments as a signal that industry capacity could outpace demand growth in the medium term even when the near-term outlook remains robust.

Moreover, over the last couple of weeks, there has been a broader rotation out of AI semiconductor stocks. This has brought additional downward pressure to a number of leading chip stocks, including Micron.

SMH data by YCharts.

After a strong multi-year run driven by accelerating data center build-outs, some investors are taking profits or reducing exposure to the obvious winners amid macro uncertainty and questions about the pace of AI infrastructure spending from the hyperscalers.

Micron is demonstrating incredibly strong momentum

Micron has posted robust revenue and earnings per share (EPS) growth over the last several quarters. During the most recent earnings call, management's guidance remained constructive -- highlighting new long-term supply agreements that provide greater revenue visibility and reduce cyclical risk.

MU Revenue (TTM) data by YCharts.

Equally important, Micron outlined that these strategic customer agreements come with price bands that effectively lock in optimal pricing discipline and ongoing manufacturing efficiencies. In turn, the company is positioned to maintain both healthy revenue growth and expanding gross margins over the coming years.

These dynamics point to a business that is not only growing but also becoming structurally more profitable over time. The combination of accelerating top-line results and protected margin levels supports the view that Micron is part of a sustained upward trajectory in the AI infrastructure ecosystem.

Forget the stock price, look at valuation instead

As of this writing (July 8), shares of Micron have skyrocketed 230% so far this year, making it the second-highest performer in the Nasdsaq-100. However, the stock is now down 22% from recent highs and trades for roughly $943. While this may look expensive, the absolute dollar amount of a stock price reveals little about a company's underlying valuation.

Even after its meteoric gains, Micron trades at a compelling valuation based on the forward price-to-earnings (P/E) multiple. With a forward P/E of just 6.4, I think it's fair to say that much of the company's anticipated growth over the next couple of years has yet to be fully priced into the stock. For reference, other category-leading AI chip stocks such as Nvidia, Broadcom, and Taiwan Semiconductor Manufacturing have consistently traded at forward P/E ranges between 25x and 50x throughout much of the AI revolution.

When growth prospects remain strong but the underlying valuation multiples have not expanded excessively, periods of share-price consolidation often represent attractive entry points. At current levels, Micron's risk-reward setup favors long-term investors willing to look past short-term volatility. I think the dip is an opportunity to accumulate shares in a company whose earnings power and strategic positioning in the high-growth AI memory segment continue to strengthen.

Adam Spatacco has positions in Nvidia. The Motley Fool has positions in and recommends Broadcom, Micron Technology, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.