Micron Could Be Poised for a Major Breakout Late in 2026

After the market closed on Sept. 30, Micron (NASDAQ: MU) published results for the fourth quarter of its last fiscal year, which ended on Sept. 3. Results for the period crushed expectations, with non-GAAP (adjusted) earnings per share of $33.42 on sales of $54.23 billion topping the average analyst estimate's call for per-share earnings of $31.61 on revenue of $51.07 billion.

Performance expectations were already high heading into the report, but the memory chip leader posted quarterly results and forward guidance that still blew past expectations. For the current quarter, the company's midpoint targets call for revenue of $61.5 billion and adjusted earnings per share of $38.15 -- topping the average analyst estimates for revenue of $57.02 billion and adjusted earnings of $35.40 per share. The strong results have already spurred significant gains for Micron's share price, and there are good reasons to think that the stock could end the year significantly higher.

Image source: Micron.

Micron stock has powerful tailwinds at its back

With Micron crushing fiscal Q4 estimates, issuing far-better-than-expected Q1 targets, and guiding for sequential quarterly sales growth in each quarter this year on top of a sales estimate for the current quarter that far surpassed Wall Street's expectations, the company's latest business update has provided foundations that could allow the stock to continue rallying. There's another major catalyst on the horizon that could spur substantial gains for the high bandwidth memory (HBM) chip leader's share price.

On Dec. 9, a restriction preventing Micron from buying back its stock will expire. The company had been barred from share repurchases as a condition of receiving funding under the CHIPS Act, but the two-year restriction period is now on the verge of lapsing. With this change on the horizon, there's a good chance that the tech specialist is about to return a massive amount of cash to shareholders.

In its previous earnings report, Micron said that it eventually planned to return 100% of its excess cash to shareholders. In other words, the company plans to use cash left over after operational spending and investments to drive future growth in order to carry out some combination of share buybacks and dividend payouts. It's also possible that the company could use some of its roughly $68.3 billion cash position net of debt to fund stock repurchases and dividends.

Micron has specifically pointed to the expiration of the CHIPS Act buyback restriction as an event that will allow it to increase its capital returns to shareholders. With the business posting great results and the potential for a surge in stock buybacks and big dividend increases on the horizon, the stock seemingly has a positive setup through the remainder of the year.

Keith Noonan has positions in Micron Technology. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.