Micron's Record Quarter Fuels Sky-High Price Target

Micron Technology has achieved record-breaking results for its fiscal third quarter, surpassing all consensus expectations. The company reported revenue of $41.46 billion and adjusted EPS of $25.11, with a gross margin of 84.9%. This strong performance has led to an upward revision of its price target by Susquehanna to $2,000, currently the highest on Wall Street.

The significant upgrade is largely attributed to 16 newly signed strategic customer agreements (SCAs). These non-cancellable contracts, typically spanning five years, cover approximately one-fifth of DRAM bits and one-third of NAND bits. Upon full execution, Micron anticipates more than half of its total revenue will be generated through such agreements.

Crucially, these SCAs include price floors designed to secure gross margins well above previous cycle peaks, even during potential downturns. Susquehanna now forecasts Micron to generate over $110 billion in free cash flow by fiscal year 2027, with a substantial portion expected to benefit shareholders.

Micron's DRAM revenue more than tripled year-on-year, reaching $31.3 billion, while HBM4 is reportedly ramping at twice the pace of its predecessor, with customer commitments extending beyond 2028. NAND revenue surged to $9.9 billion, with data center SSD revenue alone surpassing $5 billion in the quarter.

The company now projects the HBM total addressable market to exceed $100 billion in 2027, a year earlier than previously anticipated. Susquehanna further increased its estimates, now projecting annualised EPS to potentially reach $200 as Micron concludes fiscal year 2027.