Cautious Valuation Outlook and Cyclical Slowdown Expectation for Micron

about 1 month ago

Host/Analyst

"But I think maybe we should now address valuation, and what kind of expectations we should have for Micron headed into 2026. Because our view still stands that come the end of calendar year 2026, we would expect to see the start of a cyclical slowdown, not a downturn, we're not calling for a downturn, but a cyclical slowdown in AI infrastructure and CapEx. That would be our general baseline expectation. I'm not saying that we're gonna have a down year in 2027, but that's just our baseline cautious assumption right now is to expect a slow down from the 20% to 30% semiconductor end market sales growth rate overall, valuation for Micron. So currently trades around 36 times, trailing 12 month enterprise value to free cash flow, plus the Chips Act rebates, or in our estimate, 22 times next 12 months, which implies a 60% free cash flow plus chips growth in the next year."

The analyst offers a cautious assessment of Micron's valuation going into 2026, highlighting that despite impressive revenue figures, a cyclical slowdown in AI infrastructure and CapEx is expected by the end of calendar year 2026. The commentary also notes that while current multiples appear robust, the near-to-medium term growth may moderate, driven by anticipated lower semiconductor sales growth rates in the next year and into 2027.

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