Prediction: This Will Be Micron's Stock Price by Late 2027 (Hint: It Implies Big Gains)

Micron Technology (NASDAQ: MU) has been one of the best performers in the S&P 500 (SNPINDEX: ^GSPC) year to date, with shares up 240%. The stock has become a popular way to participate in the artificial intelligence trade because the company is a key supplier of memory chips.

I think Micron will reach $1,500 per share after the company reports fourth-quarter financial results for fiscal 2027 (which ends in August). That implies 52% upside from the current share price of $990.

Image source: The Motley Fool

Micron is growing quickly because of a memory chip supply shortage

Micron is a semiconductor company that produces memory chips and storage solutions based on NAND flash and DRAM technology. Both chip types play an important role in artificial intelligence (AI). NAND serves as long-term storage, and it loads data into DRAM, where logic chips process it.

Micron reported exceptional financial results in the second quarter of fiscal 2026, which ended in February. Revenue rose 196% to $23.8 billion and non-GAAP net income surged 682% to $12.20 per diluted share. And CEO Sanjay Mehrotra told analysts that "we anticipate exceptional records across revenue, gross margin, EPS, and free cash flow" in the third quarter.

However, Micron's impressive results were driven primarily by a memory chip supply shortage, which caused NAND and DRAM prices to triple and quadruple, respectively, in the past year. Morningstar analyst William Kerwin says the company lacks a competitive moat. As proof, despite strong financial results, Micron lost market share in NAND and DRAM in the recent quarter.

Looking ahead suggests that while the pricing power Micron currently enjoys will probably last a little longer, it will not last forever. Memory chip manufacturers, including market leaders Samsung and SK Hynix, are working to add production capacity, and several new fabrication plants should be online by 2028. At that point, supply could oversaturate the market and trigger a downturn.

The memory chip industry has historically been highly cyclical

Logic chips such as CPUs and GPUs can be highly differentiated, but memory chips are seen as interchangeable commodities. As a result, memory chip producers lack inherent pricing power and are instead at the whim of industry cycles. Periods of undersupply, and higher prices, are followed by periods of oversupply, and lower prices, and vice versa.

For instance, pandemic-driven demand for personal computing devices such as laptops and gaming consoles led to a memory chip boom in 2021. But manufacturers oversupplied the market and were eventually forced to cut prices. That caused memory chip revenue to drop 40% by 2023.

Some analysts think the AI boom has fundamentally altered the industry. Hyperscalers are signing multiyear contracts with memory chip producers to ensure supply visibility, and those deals deviate from the historical norm by covering much longer periods. Years instead of months. Micron just signed a five-year contract for the first time in history.

Those deals may keep prices more stable, but I doubt they represent a structural shift in the industry. Memory chip sales could still drop sharply, albeit more slowly, when supply inevitably catches demand. So investors must decide what Micron stock is worth today knowing the company may hit an earnings cliff in the next two or three years.

Why Micron could reach $1,500 per share by late 2027

Wall Street expects the current memory chip cycle to peak in 2028. In turn, the consensus estimate says Micron's adjusted earnings will increase at 172% annually to reach $98.52 per share in fiscal 2027. That makes the current valuation of 45 times adjusted earnings look rather cheap.

However, the current valuation is likely to get compressed as the memory chip cycle approaches its peak. Micron traded around 15 times adjusted earnings when the last cycle was nearing its peak, so I will assume the stock drops to that level by late 2027.

If Micron matches Wall Street's consensus estimate (i.e., non-GAAP earnings of $98.52 per share in fiscal 2027) and the stock trades at 15 times adjusted earnings, the share price will be about $1,500 when the company reports financial results for fiscal 2027.

Trevor Jennewine 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.