Bernstein Maintains $1,300 Price Target on Micron, Expects Memory Shortage to Extend Through 2028
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Bernstein maintained Micron's $1,300 price target and outperform rating, with a core call that the memory-chip supply shortage will persist through 2028 — yet the report also warned that $32 billion in customer commitments covers only about one-fifth of remaining performance obligations, meaning the lock-in story unravels if the shortage ends early.
How much did Micron actually earn this quarter?
Fiscal Q4 revenue hit $54.229 billion, up 30.8% quarter-on-quarter — beating Bernstein's estimate by 6.0% and the 28-day consensus by 5.3%.
The standout was NAND flash — a chip that stores data permanently: average selling prices jumped roughly 30% QoQ, far above Bernstein's 18% forecast. DRAM — the chip that handles a device's working memory — rose in the "high teens percent" range.
Operating margin of 80.7% missed Bernstein's estimate by 2.3 percentage points. The culprit was a one-time employee incentive bonus that inflated operating expenses — not a deterioration in the underlying business.
Why did next-quarter guidance beat expectations again?
Management guided FY2027 Q1 revenue to $60.0–63.0 billion, implying 11%–16% QoQ growth — roughly 8%–13% above the $55.789 billion consensus.
EPS guidance of $36.84–$38.84 topped Bernstein's estimate by 3%–9%. This means → Micron itself believes demand growth has not yet peaked.
The sole blemish: gross-margin guidance of roughly 86.0%, about 1 percentage point below expectations — still the same bonus hitting cost of goods sold. Bernstein expects this headwind to fade, with modest price hikes driving higher margins through the rest of FY2027.
$50 billion in capex — where is the money going?
Micron raised FY2027 net capex guidance to over $50 billion (Bernstein's own model had $45 billion), split roughly $25 billion in H1 and more in H2.
In plain terms = most of the increase is about building cleanrooms — the ultra-sterile factories where chips are made — ahead of schedule, so capacity is ready by late 2028 and beyond.
This reflects a big bet: the shortage lasts at least two more years, and spending now is the window to lock in market share.
How much capacity is locked in — and are those commitments reliable?
Micron has signed 26 strategic customer agreements covering more than 35% of revenue through 2030; management expects that share to rise to about 50%. Including non-strategic purchase orders, over 75% of FY2027 output is spoken for.
Customer financial commitments have risen to $32 billion, mostly in cash deposits.
But Bernstein left a sobering footnote: $32 billion is only about one-fifth of roughly $150 billion in remaining performance obligations. This means → four-fifths of those commitments carry no cash guarantee. The report states plainly: "We still question the enforceability of strategic customer agreements" — in a worst case, commitments without deposits may not hold once the shortage ends.
Why does HBM actually earn less than regular memory?
High Bandwidth Memory — HBM, the ultra-fast memory paired with AI chips — has largely locked in 2027 supply agreements at significantly higher prices.
Yet Micron said this will narrow the margin gap between HBM and conventional DRAM. In plain terms = HBM sells for more, but still earns less per dollar than ordinary memory — because manufacturing is more complex and yields are lower.
Fiscal Q4 cloud-memory gross margin lagged other segments; Bernstein read this as "most likely because HBM margins are below conventional memory." Meanwhile, core data-center revenue rose to 33% of total, up from just 14% a year ago.
What underpins the $1,300 price target?
Bernstein kept the $1,300 target, anchored to a 7.6× one-year forward P/E. On FY2027 estimated EPS of $173.33, the stock trades at just 6.1× earnings.
Buybacks provide a floor: Micron will step up repurchases after December 9, 2026. Bernstein cited consensus estimates of $250–300 billion in cumulative free cash flow through FY2028, implying a 21%–25% "yield" if all excess cash is returned.
But the report's pivot point is explicit: whether the shortage truly lasts through 2028 is the make-or-break assumption. Micron's market cap is roughly $1.2 trillion, up about 270% year-to-date — if the shortage ends early, every bullish assumption above gets discounted.
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