MU stock price will reach $1,200-$1,500 by end of 2027 based on a forward P/E expansion to 7-9x.

The analysts on Wall Street that are following Micron are forecasting the company's earnings per share to soar from a $1.23 in its fiscal year that ended in August of 2024, from a $1.23 all the way up to $171 in earnings per share by the fiscal year that ends in August of 2028.

That's a massive increase in earnings power in such a short amount of time, and investors are wondering if that makes Micron stock an excellent buying opportunity or where potentially Micron stock price could be by the end of 2027, which is actually the topic of this video.

I'm going to answer where I think Micron share price will be by the end of next year, by December 31st, 2027. So, to make that stock price prediction, I'm going to need a few numbers and estimates and figures, and one of them I already talked about in the introduction, and that's the analysts' earnings per share estimate for Micron for fiscal year 2028, and you can see that figure here at $171 per share, following $155 in 2027, following $73 estimated in the current fiscal year, which ends August of 2026, which Micron will report about at the end of September.

So, at the end of this month, Micron will report their quarterly financial results for the fiscal year that ends August of 2026.

So, needless to say, the analysts on Wall Street are forecasting huge growth for the company's earnings over the next few years, and those growth figures are justified as something that we've seen from other companies and Micron as well, memory prices are soaring, storage prices are soaring as a result of supply shortages that are going into the data centers optimized for AI.

So, these earnings per share estimates and these figures for Micron are grounded for information from other sources as well. The next figure I need is Micron's forward price-to-earnings ratio, which as of this recording stands at 5.861.

And you're correct in thinking that this is a ridiculously low forward price-to-earnings ratio for a company that has soaring revenue, you know, in its most recently completed quarter Micron's revenue increased by more than 4x compared to the same quarter last year.

Soaring profitability as I just shared with you in the earnings per share estimates and operating profit margin that eclipsed 80% in its most recently completed quarter, the highest of any company that I'm following.

And so, with these kinds of remarkable numbers, Micron stock selling at such a cheap price is really a standout figure that really questions investors in why this stock is trading at such a cheap valuation.

And of course, the answer is, if you've been following Micron, you already know, it's the cyclical nature of the business. Investors are forecasting that after the earnings soar over these next few years, it's going to reach a peak, and perhaps from that point, it might collapse because semiconductor industry overall is cyclical in nature for one reason or another.

For example, one cause of cyclicality in 2020 and 2021, consumers were locked down at home worldwide because of the pandemic, and governments worldwide provided trillions of dollars of stimulus to consumers.

So, people had more money to spend and fewer places to spend that money.

One of the things that consumers spent a lot of money on is electronics. People bought more phones, laptops, computers, et cetera. So, there was a surge, a concentration of purchases in consumer electronics, which brought forward demand from future years.

And so, there was that cyclical increase. And then, of course, in 2022 and 2023, there was a gap.

There was a decline in how many people purchased laptops and personal computers and smartphones, and the industry overall struggled for years. And still to this day, the smartphone industry is struggling, the PC industry is struggling for growth because so many people purchased those devices in 2020 and 2021.

And investors are fearful that the same thing will happen with the data center. They're spending so much right now, the hyperscalers, to build these data centers over these next several years, that investors are forecasting that once they're complete with their build-outs, that there'll be a gap, that they won't need to spend any more, that only replacements of existing data centers will drive demand going forward, and that will be the next cyclical top, which then will create a cyclical bottom, and so investors are not confident that Micron's earnings per share will remain elevated for an extended period beyond these next few years.

So, given all that, where do I think Micron share price will end by December 31st, 2027?

All right. But, I actually think the company's forward PE multiple will rise. And if it rises to seven, then the share price could rise to $1,197, which would be a roughly 20% increase from where it is today, respectable rate of return given the elevated risk for Micron investors, would still be pleased with this rate of return.

I know I would between now and the end of next year if I were to gain roughly 20% on my Micron shares, I would be happy if I owned them.

But, if the forward PE multiple were to increase even more to nine, then the share price could rise even more to $1,539.

That would be a roughly 50% increase, or yeah, 50% increase from where it is today, and I know investors would be pleased with that rate of return over the next 15 months or so.

But, all things being considered, it's not all sunshine and rainbows. The forward PE multiple could decline, and if it declines to four, then the share price could fall by more than 30% to $684.

That's why I mentioned you've got to consider risk when you're thinking about investing, and risk versus reward is an important consideration in all of my evaluations. But, all that being said, my base case scenario is for Micron share price to end 2027 between 1,200 and 1,500 dollars per share between the forward PE multiple of seven and nine.

At the midpoint, that would be 1,350, which would represent an upside of 34% from its current market price, which I think is a excellent rate of return for a company with this level of risk.

But there are factors that could cause the share price to fall outside of this range. And one upside factor is if investors rerate Micron stock and become convinced that this is no longer a cyclical business.

And one of the mechanisms through which this can happen is if Micron signs more of these longer-term agreements. They've already signaled to investors that they've signed roughly 16 of these longer-term agreements between now and 2030.

And if they should expand on that and continue signing those longer-term agreements, which sends their sales forecasts and gives visibility to their sales into well into the 2030s, into 2035, and really change how their sales process flows, then that could convince investors that this is no longer a cyclical company, that this is a company that has visibility into sales for future years.

They're already signing agreements to replace the memory and storage that they're selling to these data centers today. They're signing not just the sales for today, but they're also signing the replacement of these current units that are going into the data centers today.

They're already signing the agreement for the replacement for 4 years from now, and then the replacement of those 8 years from now. If they can really show that to investors through that mechanism of longer-term agreements, that could cause a whole rerating of Micron stock.

and as you can see, it's trading at a fraction of the average price of a stock in the S&P 500 when measured on a forward price-to-earnings basis. So, if Micron's valuation approaches anywhere near the average stock in the S&P 500, that could really cause the share price to soar to over 2,000, even perhaps 3,000 dollars per share in that scenario, which is not very likely, but a possibility to be sure.

I also wanted to highlight one downside where Micron share price could fall outside of this range, even below this range, and that would be the scenario of a peak of the capital expenditure cycle.

If these large hyperscalers really convince investors or tell investors that, you know what, we've built enough, we don't need to build any more, we really need to control our spending, we need to control our balance sheet, we need to conserve cash, we're not so interested in building as much as we previously were, and maybe even we spent too much, so we really want to restrict our spending.

And also, we're also renegotiating some of these longer-term contracts we signed with some of these companies, and we really don't need as much data center capacity as we thought we did.

If we should start to see these kinds of statements coming out of Amazon, Alphabet, Microsoft, Meta Platforms, et cetera, that could really cause Micron share price to collapse, uh even below the 680 dollars per share I'm highlighting here.

Again, this is an unlikely scenario, but if it should happen, it's a non-zero probability. If it should happen, Micron share price could fall even outside of the bottom of this range I'm estimating.

Really interesting stuff here with Micron. I'm looking forward to the company's earnings results at the end of this month.

I'm going live exclusively for channel members. That's going to be an exciting event. I hope many of you will join us. Micron, of course, one of the key key stocks in the whole AI ecosystem.

As Micron goes, so goes a lot of other industry stocks.

And it's going to be very informative what Micron has to say at the end of September.