Why Is Micron Stock Crashing, and is it a Generational Buying Opportunity? | MU Stock Analysis

Micron shares are down over 27% in the last month. And I want to revisit this company. Look at their latest performance. Look at the forecast. Compare it against the valuation now that the share price is lower to determine if this is still a buying opportunity. >> I want to thank the Mly Fool for sponsoring this video. Visit full.com/parkkev for the 10 best stocks to buy now. >> Micron's price action in 2026 has been absolutely wild. It's down 27% in the last month, but if we look at the year-to-ate performance, it's still up over 187%. I've been encouraged by Micron's improving fundamental performance. The share price is not up because of hype or enthusiasm. The share price is up because the company's sales, profits, and cash flow are booming. In the most recently completed quarter, Micron reported $41.5 billion in revenue. That's up more than 4x from the $9.3 billion the company reported in the same quarter last year. The management team said that they believe their multi-year strategic customer agreements will significantly enhance the durability and predictability of Micron's strong financial performance. In other words, they expect the good times to continue because they've locked in longerterm contracts. The management team said in further detail in a conference call with Wall Street analysts that even in the price agreements that they've signed with these strategic customer agreements, those low ends of those prices would still generate profit margins well above any level in the company's previous peak cycle. In other words, they arranged for these longerterm agreements. And in those longerterm agreements, they allowed a range of pricing with its customers. They said it's going to be at least this amount and perhaps this amount depending on market conditions. The management team told investors that even at the lower end of those customer agreement prices, those profit margins at the lower end would still be well above the company's previous peak levels of profitability. Speaking of profitability, this company has never been more profitable. Operating income soared to 33.3 billion in its most recently completed quarter. That's up roughly 15x from the $2.2 billion they reported in the same quarter last year. So, are you beginning to see a trend here? The company's stock price is up, but the company's revenue and profits are up by an even larger amount. The operating percent at 80.4 was up almost 4x from 23.3. Furthermore, at an operating profit margin of 80.4%, it's the most profitable company in my coverage of stocks and I cover over 100 closer to 200 companies. There is no company that's reporting an operating profit margin above 80.4%. Of course, the big concern and a reasonable one from investors is how long can these good times last? Micron is generating these kinds of increases in revenue and profit due to higher prices for its products. The semiconductor industry and memory and storage in particular are notorious for these wild fluctuations in prices. The company has mentioned that the industry remains supply constrained for the rest of 2026 and probably beyond 2027. But starting in 2028, we're going to see significant amounts of supply of memory and storage come online and that could impact pricing industrywide. Micron itself is investing in significant manufacturing expansion. In the third quarter of 2026, they invested $7.1 billion in capital expenditures, primarily to expand their manufacturing footprint. They've got new facilities coming online in 2027 and more coming online from 2028 to 2030. Additionally, the company's investing in next generation technology that promises to enhance the performance of its memory and storage products. For the fourth quarter of 2026, Micron is forecasting $50 billion in revenue with its gross profit margins at approximately 86%. That would be roughly 25% sequential growth from the previous quarter and a gross profit margin above its 84.6% increasing to 86%. So for the upcoming quarter, Micron expects the good times to continue with revenue increasing sequentially by 25% and then year-over-year by a much larger amount. With gross profit margins at approximately 86%, it's reasonable to assume that its operating profit margins would rise incrementally from where they are in the most recently completed quarter. All that being said, investors are growing increasingly nervous about Micron because of the rapidly changing dynamic surrounding artificial intelligence. The industry is moving so quickly, it's hard for investors to get comfortable. Seemingly every day, there's an announcement from one part of the world about some new innovation that threatens one part of the industry or another. Micron stock is down over 27% in the last month and the valuation is still relatively cheap. Micron is trading at a forward price to earnings of just 5.3. Just 5.3. This is cheaper than a valuation of a company like Verizon or AT&T that have roughly zero growth expectations for the foreseeable future and forever. Whereas Micron might be a cyclical company with ups and downs, longerterm, the trend line growth for this company is higher. Additionally, I've calculated a fair value for Micron using my discounted cash flow model that suggests the stock is worth $1,487 per share. That shows that the stock is significantly undervalued at $820. I'm estimating Micron generates $49 billion in free cash flow in 2026, rising to 116 billion in 2027, and then further rising to $147 billion in 2028 before experiencing the decline in 2029 to 125 billion. From that point onward, I'm forecasting meaningful growth with the company's free cash flow totaling $397 billion in 2035. So as part of this estimate for discounted cash flow value, I have significant growth estimated from Micron and that's because I see a structural shift in demand for memory and storage. Companies just five companies actually in 2026 will collectively spend an estimated $800 billion. That's up from roughly $500 billion last year and estimates for 2027 suggest there will be a trillion dollars in spending for data centers. Now, the growth will likely continue in 2028. And from that point onward, there will be multi- trillion dollars of new data centers that have been added over the previous five or 6 years. Those data centers and those components that are in those data centers will need to be consistently updated and upgraded. So, Micron will experience a replacement cycle demand from those data centers and those customers that are operating those data centers. This is an entirely new source of demand for Micron. Whereas previously the data center market might have been less than 10% of overall demand for Micron. So to answer the question I posed in the headline, I do think this dip or crash or drop whatever you want to call it in Micron stock is a buying opportunity. It might even be a generational buying opportunity. I've ranked this as a buying opportunity with a high conviction and I updated this ranking on July 28th, 2026. By the way, if you want access to these earnings reports that I highlight and make available, you can get access to them with the channel membership at the investor tier or above. Click that join button below and you can see all of the membership benefits we offer.