Micron Technology, Inc. (NASDAQ: MU) — Pro-Forma Valuation
Conclusion
BUY (conviction-conditional) — ~$1,069 fair value vs $937 (+14%)
- Rating
- BUY
- Fair value
- $1,057–1,069
- 12-mo target
- ~$1,094
- Price (13 Jul 2026)
- $937.00
- Bear / Bull
- $830 / $1,171
- WACC
- 12.59%
A pro-forma, three-statement valuation of Micron whose books are dictated by one variable the company does not control — the price per bit of memory — now stabilized by multi-year take-or-pay contracts with price floors funded by ~$18bn of customer cash deposits. At $937 the market prices exactly the contract floor (62% gross margin) held in perpetuity, which the terminal-margin grid values at ~$921. The buy case is arithmetic on conviction: if the probability the AI-boom/contract regime holds is at least 66%, the stock clears its 12.6% cost of equity. At a 70% weighting, fair value is ~$1,069 (+14%) with a 12-month target of ~$1,094.
The model — a driver-based pro-forma architecture
The workbook spans Assumptions (drivers, macro block, capital-return rule, scenario toggle), three statements over FY21–25A plus FY26–30E with balance checks at 0.00, and dedicated WACC, FCFF, FCFE, COMPS, DDM and PT2027 sheets. Deposits are treated as quasi-debt throughout; FCFE strips interest income; buybacks are modelled as a function of lagged free cash flow with dynamic share retirement.
Every valuation method is triangulated: FCFF blend $1,069, FCFE blend $1,057, plus exit-multiple IRRs, a DDM policy floor, and a terminal gross-margin grid ($699/$921/$1,026/$1,091) that frames the whole debate.
Drivers of the call — what dictates the books
Every driver is grounded in regressions carrying t-stats. Revenue tracks hyperscaler capex (beta 1.21, t=6.0, R²=0.48) and Korea semiconductor exports (beta 2.97, t=7.1, the timeliest monthly thermometer); gross-margin change moves +0.31pp per 1pp of revenue growth (t=8.9) — margin IS the cycle. An AI-announcement event study shows +7.9%/+11.8% abnormal returns at 1–2 months, gone by month 3.
The competitive read: roughly 55–60% of revenue sits behind high walls — HBM, contracted cloud DRAM, GDDR and Western auto/flagship mobile sockets.
Scenarios and risks — what would change the call
Scenario ladder vs market price
Per-share values from the scenario toggle and valuation blends against the $937 market price
Scenario toggle and valuation blends from the model workbook.
The scenario toggle blends S1 Cycle Correction (30% weight: FY28 −10%, gross margin easing to 65% → $830, history's base rate) against S2 Boom-Normalize (70% weight: FY28 +25% tapering to +6%, GM easing 80%→70% → $1,171). Below two-thirds conviction the stock is a hold at fair value.
Ranked pre-mortem risks: a hyperscaler capex digestion year (the revenue driver works in reverse), quiet renegotiation of take-or-pay floors in a downturn, deposit-counterparty circularity around the $18bn, CXMT commodity flooding from 2027 plus a Samsung HBM price war, and crowding — a consensus AI long after a 10x run with 15–25% gap-risk on any guide-down.
Validation and verification
Independent verification runs on two engines: a Python shadow model that converges (~9 iterations per year) and ties with balance checks of 0.000000 across all years, plus a formulas-engine recalculation reporting zero error cells. FY26E is calibrated directly to reported 9M actuals (revenue $78,959M, Q3 gross margin 85%), yielding modelled FY26 revenue of $125.2bn — and FY27E EPS of ~$103 sits below street (~$149), flagging near-term prints as two-sided risk.