Micron on the eve of Wednesday's earnings report: The divergence between bulls and bears has never been this large

Introduction: Micron Technology (Micron, MU) will release its Q4 FY2026 financial report after the market closes on September 30, Eastern Time (October 1, midnight Beijing Time). The company previously provided a revenue guidance of $50 billion (with a fluctuation of $1 billion), and a non-GAAP EPS of $31 (with a fluctuation of $1); Wall Street consensus expects revenue of about $51.07 billion and adjusted EPS of about $31.52, representing year-on-year growth rates of approximately 351% and 938%, respectively.

However, the market's focus on this financial report is not solely on the numbers for the quarter. Some market views suggest that performance improvements have already been reflected to some extent in the stock price, and the market is also concerned about how long this storage cycle can last. D.A. Davidson analyst Gil Luria reiterated a target price of $2000 on the eve of the financial report, implying an upside of about 87% from the closing price of $1071.72 on September 29; meanwhile, "big short" Michael Burry replaced Micron's short position with put options expiring in June next year with a strike price of $500. One side gives a target price of $2000, while the other expresses a bearish view through put options with a strike price of about $500.

I. Quarterly Performance: Market Expectations Overall Strong

First, let's look at the numbers themselves. The company guides for revenue of $50 billion (±$1 billion) and non-GAAP EPS of $31 (±$1), but several institutions have provided more optimistic forecasts:

• Citigroup: Revenue of $51 billion, EPS of $31.45;

• Goldman Sachs: Revenue of $51.9 billion, EPS of $32.54;

• UBS: Revenue of $52.4 billion, EPS of $32.50, the most aggressive;

• JPMorgan (Harlan Sur): Revenue of $51.4 billion, gross margin of 86.2%, EPS of $31.73, all higher than market consensus expectations.

What does $50 billion in quarterly revenue mean? Micron's total revenue for FY2025 was about $37.1 billion—one quarter's revenue exceeds the total of the previous year.

From realized performance to structural variables, this financial report has three layers of suspense: whether the performance guidance can exceed the elevated market expectations, the timing of HBM4 mass production and revenue pull, and how the price trends of conventional DRAM and capital expenditure plans will provide a basis for the industry's outlook.

Morgan Stanley (MS) has a relatively conservative forecast for the quarter: expecting revenue of $50.024 billion, a year-on-year growth of 342.1%, a gross margin of 86.4%, and earnings per share of $31.2, below the market expectation of $31.49. However, MS also expects Micron to raise its earnings forecast, but the increase will be lower than in previous quarters.

II. The Underlying Logic of the Super Cycle: HBM is "Draining" DRAM

From the perspective of industry supply and demand, a structural factor currently attracting market attention is that the expansion of HBM capacity may squeeze some traditional DRAM supply, while traditional DRAM still has market demand.

Samsung Electronics Executive Vice President Kim Taewoo provided a key figure in a recent statement on September 29: it is expected that by 2027, HBM will account for nearly 30% of global DRAM wafer capacity, up from about 20% currently. Dongwu Securities' calculation path is clearer—HBM capacity's share of total DRAM capacity is expected to rise from 12.3% in 2024 to 17.1% in 2025, 20.8% in 2026, and reach 22.5% in 2027. The wafer capacity required for HBM4 is about three times that of general-purpose DRAM, and the full-scale increase in HBM4 will inevitably reduce the available capacity of traditional DRAM. ADATA Technology Chairman Chen Libai confirmed that the production capacity of three original manufacturers for 2027 has been sold out, with HBM and AI server applications consuming about 70% of DRAM output.

What makes Micron unique is that it is the only company among the three major storage manufacturers with significant exposure on both the HBM and traditional DRAM fronts. Samsung and SK Hynix have a higher revenue share from HBM, but Micron's traditional DRAM and NAND business is larger, so its profitability may also be more significantly affected by changes in traditional DRAM prices. BMO channel research shows that the performance surprise from rising server DDR5 prices is greater than that from HBM, and HBM3E and HBM4 prices are likely to rise sequentially, while consumer memory demand is relatively weak.

Micron's own progress is also accelerating: the 12-layer HBM4 designed for NVIDIA's Vera Rubin platform has begun mass production and shipping in Q1 2026, with energy efficiency improved by over 20% compared to HBM3E, and cumulative shipping revenue has exceeded $1 billion. Micron CEO Sanjay Mehrotra stated in the June earnings call that the ramp-up speed for HBM4 12-layer mass production is about twice that of HBM3E 12-layer. According to industry news, Micron's monthly HBM production capacity is expected to double to 100,000 wafers by the end of the year, with HBM4's share of its HBM output increasing from about 20%-30% at the beginning of the year to a maximum of 50% by the end of the year.

III. $2000 Target Price: Luria's Main Points and Basis

On the eve of the financial report, Luria reiterated a target price of $2000, close to the highest level on Wall Street. He raised the target price from $1500 to $2000 in June, reasoning that Micron has entered the "best visibility phase in the semiconductor industry," with tight storage supply and demand expected to last at least until 2027.

His core arguments have three layers:

1. Luria believes that the current pricing in the HBM market is significantly influenced by supply constraints, with demand remaining strong, while new supply will take time to be released.

2. Micron's earnings visibility is lengthening. HBM orders are typically locked in more than a year in advance, and a considerable portion of revenue for 2027 can be reasonably predicted.

3. Valuation methods are switching. He wrote in the report: "This storage cycle is a complete cycle of GPU, CPU, and storage integration. AMD and Intel's price-to-earnings ratios are maintained at 40-60 times, while Micron's price-to-earnings ratio is only 7 times."

Luria also mentioned a recent change: Meta's successful launch of Muse has opened up new application scenarios for consumers. "Just a few weeks ago, we were worried that the storage demand brought by Meta would weaken, but now that possibility seems very low."

However, the nearly $500 gap between Wall Street's average target price of $1520 and $2000 precisely illustrates the market's lack of consensus on whether "Micron is a cyclical stock or a growth stock." JPMorgan maintains an "overweight" rating with a target price of $1540, estimating this quarter's revenue, gross margin, and EPS to be better than market consensus, and stating that the price increase slowdown is a matter of sales rhythm, not weakening demand; UBS maintains a target price of $1625, expecting that DRAM will remain in a state of supply shortage at least until Q2 2028, and anticipates that Micron will begin stock buybacks starting in Q2 FY2027, with an initial scale of about $20 billion per quarter.

IV. The Logic of the Bears: Views and Risks of Cycle Reversion

In stark contrast to Luria is "big short" Michael Burry.

According to China Securities Overseas Information, Burry revealed in his latest weekly briefing to investors that he has largely replaced his original short positions in major AI stocks with put options, with his short position in Micron being replaced by put options expiring in June next year with a strike price in the $500 range. Burry's exact words were: "Due to the shortened timeline, I want to gain greater leverage in my short positions."

He believes that the structural shortage of storage chips generated by the current AI construction boom is temporary, and the industry will eventually revert to the traditional cycle of boom and bust: "Within the next two years, as production catches up with demand, this shortage will disappear, and storage chips will enter a downward cycle again."

Citigroup analysts also warned before the financial report that DRAM and NAND prices will slow down in the coming quarters; Bernstein expects the storage cycle to begin to "normalize" by 2028. Historically, some storage stocks have experienced significant price volatility or corrections even during strong performance periods, but past performance does not guarantee future results.

V. Three Risks to Watch

1. The yield ramp-up of HBM4. HBM4 is still in the early stages of mass production, with yields lower than the previous generation HBM3E, and the manufacturing process consumes more DRAM capacity. If yield improvement is slower than expected, Micron's shipping rhythm on the HBM side may be affected. The market is also paying attention to whether capacity ramp-up meets expectations, customer certification progress, and the timing of revenue pull—since large-scale shipments from downstream platforms may be concentrated in 2027, HBM4's significant contribution to revenue may mainly fall into the next fiscal year.

2. The price elasticity of traditional DRAM and capital expenditure. According to Bank of America analysts, the key data that the market is truly concerned about is Micron's outlook for gross margin and capital expenditure for FY2027: if the gross margin can be maintained at around 85%, the forecast of $150-$200 EPS for that fiscal year will be supported; capital expenditure is expected to be in the mid-to-high range of over $40 billion, a significant portion of which is used for cleanroom construction and may not immediately translate into new production. However, if market expectations for the storage cycle change, Micron's stock price may still experience volatility, even if actual performance exceeds market expectations.

3. The suppression of the macro interest rate environment. On September 28, Micron closed down 2.61%, while the Philadelphia Semiconductor Index fell 1.61%, as soaring U.S. Treasury yields suppressed all high-valuation tech stocks. If the Federal Reserve continues to raise interest rates in October, high-beta storage stocks may face additional valuation pressure in a tightening liquidity environment.

Conclusion

The market has high expectations for Micron's upcoming financial report. Factors such as HBM prices, traditional DRAM supply and demand, and AI capital expenditure are all key areas of market focus, but actual performance may still differ from market expectations. Beyond the financial report numbers, the market will also pay attention to management's outlook for 2027 and how investors view Micron's future business cyclicality and growth potential.

Luria's $2000 target price and Burry's put options reflect differing views in the market regarding Micron's future performance. The financial report and management outlook will provide more information to the market.

For this financial report, which factors are you more concerned about—HBM supply and demand, traditional DRAM prices, capital expenditure, or management's outlook on future cycles?

Disclaimer: This article is for general information and educational purposes only and does not constitute any investment advice, recommendation, offer, or solicitation, nor should it be considered a basis for buying, selling, or holding any securities or other financial products. The views, forecasts, target prices, and other forward-looking information mentioned (if any) are sourced from relevant third parties or public information and do not represent BIT's investment views or advice. Market conditions may change at any time, and actual results may differ significantly from the relevant forecasts or expectations. Investing involves risks, and investors should make independent investment decisions based on their own circumstances and seek professional advice when necessary.