Goldman Sachs Significantly Raises Micron Target Price to $900, Sees Tight Supply-Demand Persisting Through 2027

Overview

This report is Goldman Sachs' preview of Micron Technology's (MU) fiscal third quarter of 2026 (ending May). The core conclusion is that, benefiting from strong DRAM pricing trends and sustained supply constraints, Micron's quarterly results will once again significantly exceed market expectations, and this tight supply-demand balance is expected to persist through 2027. Based on this view, Goldman Sachs has substantially raised its earnings forecasts for the next two years and increased its 12-month target price from $400 to $900, while maintaining a 'Neutral' rating.

Core views

Earnings expectations significantly above consensus. Goldman Sachs estimates Micron's FQ3 revenue will reach $37.6bn, with gross margins of 83.4% and non-GAAP EPS of $22.07, representing beats of approximately 9%, 1.5 percentage points, and 12% versus Wall Street consensus, respectively. For the subsequent August quarter (FQ4), Goldman Sachs is even more optimistic, projecting revenue guidance of $48.8bn and EPS of $29.95, exceeding consensus by 21% and 26%, respectively. On a full-year basis, Goldman Sachs' CY26 revenue and EPS forecasts are now 30% and 36% above consensus. Significant upward revision to earnings forecasts and target price adjustment. Reflecting stronger industry pricing and upside demand, Goldman Sachs has raised its CY26 and CY27 revenue and non-GAAP EPS estimates by an average of 28% and 36%, respectively. Consequently, the 12-month target price has been significantly increased from the previous $400 to $900. The new target price assumes an unchanged 18x P/E multiple applied to a higher normalized EPS estimate of $50 (previously $22). This adjustment is primarily attributed to stronger pricing growth and greater earnings visibility resulting from supply tightness expected to continue through 2027. Market focus and key catalysts. Investor attention is currently highly concentrated on three areas: first, the specific terms of Strategic Customer Agreements (SCAs), particularly the level of price guarantees included and whether new agreements have been reached; second, the sustainability of current DRAM pricing strength; and third, the HBM (High Bandwidth Memory) roadmap, including Micron's ability to maintain approximately 20% market share and further enhance its position through HBM4. Goldman Sachs believes that given the significant stock price appreciation and market optimism regarding long-term agreements, investor positioning is already very bullish. Therefore, any incremental information on these three points during upcoming earnings calls will be a key driver of stock price volatility.

Analysis framework

Goldman Sachs' analysis follows a typical 'cyclical stock preview' framework. First, starting from industry supply-demand fundamentals, it determines that the DRAM market is in a 'tight balance' phase characterized by increasing demand叠加 short-term supply constraints, and predicts this state will be sustained (through 2027). Second, mapping industry conditions to the company level via volume-price decomposition logic, it identifies price increases as the core driver of earnings beats this quarter and going forward, rather than mere shipment growth. Finally, regarding valuation, it employs a P/E method based on normalized earnings; instead of using current peak earnings at the cycle high, it uses cross-cycle 'normalized EPS' as a valuation anchor to avoid assigning excessively high or low valuation multiples at the cycle peak, reflecting a prudent approach to the memory industry's strong cyclical nature.

Methodology notes

• Valuation MethodologyPE/PEG valuation

  Normalized P/E Valuation Method

  For highly cyclical industries such as memory, directly multiplying current peak earnings by a P/E ratio leads to valuation distortion. The report uses 'normalized EPS' ($50 in this case) rather than current forecast EPS as the valuation base, aiming to smooth cyclical fluctuations and reflect average profitability across a full cycle, thereby deriving a more robust target price.

• Industry Analysis FrameworkSupply-demand framework

  Assessment of Tight Supply-Demand Duration

  The report not only assesses current supply-demand tightness but also explicitly provides a timeframe forecast for the tight balance (persisting through 2027). In cyclical stock analysis, the 'duration' of favorable conditions often determines the scope for earnings revisions and valuation tolerance more than the 'magnitude' alone.

• Company Fundamentals & Financial FrameworkVolume-price decomposition

  Analysis of Price-Driven Earnings Elasticity

  The report explicitly states that beats in the current and next quarter are primarily driven by 'pricing upside.' In the semiconductor memory industry, where fixed costs are high, marginal price increases translate into gross and net profit with higher leverage; this is key logic for understanding its explosive earnings potential.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Micron Technology (MU.US)

  Core Beneficiary: Direct beneficiary of tight DRAM supply-demand balance and HBM demand growth

  Strengths

  Strong DRAM pricing power; Stable HBM market share (~20%); Strategic Customer Agreements provide demand visibility

  Comparison

  Monitor execution and share changes in HBM relative to Samsung and SK Hynix

  Risks

  CXMT gaining DRAM market share could impact pricing; HBM roadmap execution falling short of expectations

Key data

• FQ3 Revenue Forecast$37.6bn~9% above consensus of $34.4bn; +304% YoY
• FQ3 EPS Forecast$22.07~12% above consensus of $19.74; +1,057% YoY
• FQ3 Gross Margin Forecast83.4%Above consensus of 81.9%; +4,448bps YoY
• CY26/27 Earnings Revision Magnitude28%/36%Average upward revision to revenue and non-GAAP EPS forecasts
• 12-Month Target Price$900Significantly raised from prior $400; based on 18x P/E and $50 normalized EPS
• HBM Market Share~20%Expected to maintain or expand current share levels

Impact & implications

The report argues that sustained tight supply-demand balance will bring structural improvements in pricing power and margins to the entire memory industry, with Micron as a leading player benefiting directly. For investors, this implies that even after significant stock price appreciation, as long as the supply-demand gap remains unfilled and pricing trends do not reverse, the company's earnings ceiling continues to rise. Meanwhile, the implementation of Strategic Customer Agreements (SCAs) is viewed as a key variable for locking in long-term demand and reducing cyclicality; if agreement terms are better than expected, earnings certainty will be further enhanced.

Risks

• HBM Roadmap Execution Risk: If the company lags behind Samsung and SK Hynix in HBM product development or share gains, growth expectations could be impacted
• Intensified Competition Risk: Continued DRAM market share gains by CXMT could negatively affect industry pricing dynamics
• AI Accelerator Demand Volatility: If HBM content growth in AI accelerators is lower than current expectations, demand-side shortfalls may occur

What to watch

• Strategic Customer Agreement (SCA) Details: Including price guarantee levels and whether new agreements are signed
• Sustainability of DRAM Pricing Trends: Management guidance on pricing trajectory for coming quarters
• HBM Market Share and Roadmap: Particularly HBM4 progress and updated share targets