Is Micron Stock Expensive at $725? Here's the Math on Why Shares Are Still Dirt Cheap.
Key Points
Micron stock has been on a generational run as growth investors pour into memory chip stocks.
Micron's rising share price makes it appear an expensive stock.
Forward earnings analysis suggests Micron stock remains reasonably valued.
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As of the closing bell on Friday, May 15, shares of Micron Technology (NASDAQ: MU) closed at $725. Over the past month, Micron stock has nearly doubled as investors realize the company's role in the artificial intelligence (AI) semiconductor value chain.
While the absolute share price marches higher, smart investors understand that raw price tags reveal little about underlying value. Micron's real story lies in its earnings power and growth trajectory amid an AI memory supercycle. Let's explore why Micron stock remains attractively priced for continued upside.
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Image source: Micron Technology.
Micron is on an explosive run
Over the last month, Micron stock skyrocketed from roughly $448 to a high of $804. While the stock has retreated from its peak, its current price still represents a gain of roughly 58%. Meanwhile, Micron's market capitalization is now within shouting distance of the exclusive trillion-dollar club.
The surge was propelled by a couple of factors. First, the company delivered monster results for its fiscal second quarter (ended Feb. 26). Revenue nearly tripled year over year to $23.9 billion, while earnings per share (EPS) expanded from just $1.41 during the second quarter of fiscal 2025 to $12.07 this year.
Are stock price and valuation the same thing?
At more than $700 per share, Micron appears expensive to price-sensitive investors. Absolute share price says virtually nothing about a company's earnings, cash flow, or growth. The meteoric ascent in Micron stock reflects exploding profitability as opposed to speculative froth.
Forward P/E suggests Micron stock is dirt cheap
Wall Street expects Micron's EPS to be around $58 this year and then grow to $100 by fiscal 2027. Nevertheless, Micron trades at a forward price-to-earnings (P/E) multiple of about 8. This is quite modest for a company expected to compound its earnings by almost double over the next two years.
Data by YCharts.
In a world where memory scarcity has become a major bottleneck, Micron's forward P/E suggests the stock is not expensive, but rather heavily discounted relative to the secular tailwinds fueling accelerated AI infrastructure investments. More room in Micron stock remains for patient investors who are comfortable with volatility as supply chains ramp up with demand.
Should you buy stock in Micron Technology right now?
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Adam Spatacco 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.
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