Micron Stock Is Up 30% From Its Recent Low. Here's How Much a $5,000 Investment Today Could Be Worth by Next Year, According to Wall Street Analysts.

Micron Technology (NASDAQ: MU) has taken its shareholders on a roller coaster ride this year. After climbing 325% from the start of the year to late June, shares fell precipitously over the course of about a month. By the end of July, the stock had fallen 39% from its peak. But shares quickly recovered in August, up more than 30% from the July low.

The roller coaster ride isn't over. The stock remains extremely volatile. And investors who have sat on the sidelines watching may be wondering whether the stock is due for another leg up or down from here.

If you were to invest $5,000 in the stock today, analysts think you'd be making a good decision. Here's how much it could be worth a year from now, according to the median price target on Wall Street.

Image source: Micron Technology.

How much will Micron be worth in a year?

A $5,000 investment in Micron stock today will buy you just over five shares of the high-flying semiconductor stock at about $975 per share as of this writing. The median price target among 57 analysts covering the stock is $1,585. That implies your $5,000 investment could be worth close to $8,125 by next year.

But there's a big caveat.

That $1,585 is just a median target; there's a wide range between estimates. The highest target on Wall Street is $2,200 from Ben Reitzes at Melius Research. The lowest is $361, according to data compiled by the Wall Street Journal. It's worth noting, however, that none of the analysts have a sell rating on the stock, so price targets below the current share price may be outdated.

Still, the gap between the highest and lowest price targets on Wall Street indicates significant uncertainty about the business's future. There's a big split among investors over how long the current earnings cycle, fueled by artificial intelligence (AI), will last, and how steep the drop in earnings will be once new memory chip production capacity comes online.

Micron's management has suggested that the structural demands of artificial intelligence will lead to sustained earnings growth. At the same time, it's signing long-term strategic agreements with customers to ensure more stable demand while reducing its near-term upside in pricing. That suggests even management isn't fully confident in the business's future.

Should you buy Micron stock right now?

With the stock recovering from its recent low, shares currently trade for about 6 times forward earnings expectations. That might seem like an incredible bargain for a stock growing its earnings as quickly as Micron, but that really depends on whether you agree that earnings won't be as cyclical as in the past or not.

The stock has historically traded for between 3-times and 8-times peak earnings in past cycles. If we're nearing peak earnings over the next year or two, as analysts expect, there's not a lot of margin of safety at the current price. However, the stock arguably deserves a higher multiple if the downcycle won't hit earnings as hard.

Unfortunately, there are already signs that earnings are starting to peak. Memory chip pricing at Micron's biggest competitors, Samsung and SK Hynix, grew more slowly than expected last quarter. That's likely the impact of long-term strategic customer agreements capping pricing in some cases.

Additionally, the entire industry is building as much new capacity as possible, with a large amount expected to come online in 2028. That will start to put pressure on chip pricing, and as more supply comes online, price declines could outweigh growth in bit shipments. That will result in a collapse in earnings, especially given the higher operating costs of running new manufacturing plants.

Long-term agreements also won't prevent a significant cyclical downturn in the case of a slowdown in AI spending. Customers may simply stockpile chips they don't need, and then the downturn will hit even harder once those contracts expire. There's still significant cyclicality to worry about.

Despite the high median price target for Micron, investors may be better off waiting for an opportunity to buy the stock with a wider margin of safety, given the uncertainty around that target.

Adam Levy 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.