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Micron (MU): The Supercycle is Far From Over

  • Writer: 오리 오리
    오리 오리
  • 4 days ago
  • 4 min read

1. Executive Summary: The Market Mispricing

While Micron Technology (MU) has hit a new all-time high of $345, my quantitative models indicate significant Upside Potential (>30%). The market currently views Micron through the lens of a traditional cyclical peak, failing to account for the "Structural Supply Constraint" driven by the HBM transition.

This report utilizes a standard Discounted Cash Flow (DCF) model and a deep dive into the capacity constraints of competitors (Samsung Electronics, SK Hynix) to demonstrate why the stock is currently in a "Buy Zone," not a "Sell Zone."

2. Valuation: Standard DCF Modeling (The Numbers)

DCF is the gold standard for intrinsic valuation. The core principle is simple: calculating the present value of future Free Cash Flows (FCF).

2.1. Model Inputs (Re-rating the Assumptions)

Wall Street consensus is currently too conservative. I have adjusted the key variables to reflect the current "Supercycle" reality rather than historical averages.


Variable

Market Consensus (Bear Case)

My Estimates (Bull Case)

Rationale

Revenue CAGR (5yr)

15%

28%

Structural price increases (P) driven by HBM mix shift.

OP Margin

35%

48%

ASP expansion due to legacy DRAM shortages & fixed cost leverage.

WACC

10.5%

9.2%

Reduced risk premium due to strong balance sheet (Net Cash position).

Growth

2%

3.5%

Long-term sustainability of AI Data Center CAPEX.

The Calculation Logic

For those interested in the math behind the $452 target, here is the breakdown of the calculation:

Step 1: Project Free Cash Flow (FCF) I projected FCF to grow from $8.5B (2026E) to $24.2B (2030E).

Formula: EBIT × (1 - Tax Rate) + D&A - CapEx - Change in NWC

Step 2: Discount to Present Value (PV) Using a WACC of 9.2%, the sum of the next 5 years of cash flows is discounted to today's value.

Result: PV of Explicit Period = $78 Billion

Step 3: Calculate Terminal Value (TV) Assuming the company grows at 3.5% forever after Year 5.

Formula: [Final Year FCF × (1 + g)] / (WACC - g) Result: PV of Terminal Value = $442 Billion

Step 4: Final Equity Value

($78B + $442B) + Net Cash Position ≈ $520 Billion Market Cap $520B / Total Shares Outstanding ≈ $452.00 per share

2.2. Calculation Results

Applying these inputs to forecast cash flows for 2026–2030:

  • Present Value of FCF: $78 Billion

  • Terminal Value: $442 Billion

  • Enterprise Value: $520 Billion

  • Implied Share Price: $452.00

[Quant Conclusion] The current price of $345 assumes margins will revert to the historical mean (30%). However, given the oligopolistic nature of the current market, if margins sustain high-40% levels, the fair value is mathematically above $450.

3. Industrial Analysis: The "Samsung & SK Hynix" Factor

To justify the high growth rates in the DCF model, we must prove the existence of a "Supply Shortage." This is where the situation with Samsung and SK Hynix becomes the critical catalyst.

3.1. Wafer Capacity Cannibalization

HBM (High Bandwidth Memory) requires a significantly larger die size and more complex packaging than standard DRAM. This creates a phenomenon known as "Capacity Loss."

  • The Ratio: The wafer capacity required to produce 1 unit of HBM is roughly equivalent to producing 3 units of standard DDR5 DRAM.

  • The Impact: As Samsung and SK Hynix increase HBM production by 10%, global DRAM bit output naturally decreases by approximately 3-5%.


3.2. Competitor Landscape

  • SK Hynix (The Constraint Leader): Their HBM3E and future HBM4 lines are completely sold out through 2026. They are aggressively converting legacy lines to HBM, leaving zero capacity to increase standard DDR5 production.

  • Samsung Electronics (The Bottleneck): They are focusing all engineering resources on stabilizing HBM yields and passing Nvidia's qualification tests. Investments in legacy capacity have been delayed, exacerbating the global supply drop.



Feature

SK Hynix

Samsung Electronics

Micron (MU)

HBM Strategy

Absolute Leader (Sold out until 2027)

Catch-up Mode (Focusing on Yield)

Aggressive Share Gain (Targeting 25%)

Legacy DRAM (DDR5)

Zero Capacity (Converted to HBM)

Limited (Engineering resource diversion)

Major Beneficiary (Spillover Demand)

CapEx Plan

HBM Focused Only

HBM & Foundry Focused

Balanced (HBM + Legacy Profit)

Supply Impact

Causing Global Shortage

Exacerbating Shortage

Harvesting profit


3.3. Micron's Strategic Advantage (The Spillover Effect)

While competitors fight a war of attrition in the HBM space, a massive supply void has opened up in the standard server/PC DRAM (DDR5) market.

  • Pricing Power: Hyperscalers (Google, Amazon) are now facing shortages of standard server DRAM. They are turning to Micron, giving Micron immense pricing power.

  • Dual Engines: Micron is now firing on two cylinders: expanding HBM market share (Growth) AND harvesting record profits from legacy DRAM (Cash Cow).


4. Deep Dive: Unit Economics & Profitability

It is not just about selling more chips; it is about selling better chips.

4.1. ASP (Average Selling Price) Mix Shift

Micron’s product mix is undergoing a fundamental quality shift.

  • Then: High exposure to low-margin mobile/PC DRAM.

  • Now: High exposure to HBM (6-7x price of DRAM) and High-Density eSSDs.

  • Result: Even with flat volume, revenue and profit margins expand drastically due to the higher ASP.

4.2. CAPEX Discipline

In previous cycles, high prices led to a "Chicken Game" of massive factory build-outs, leading to oversupply. Currently, all three major players are maintaining Capital Discipline.

  • The industry has shifted to an Oligopoly structure where players prefer profit maximization over market share battles. Micron is a direct beneficiary of this new discipline.


5. Evidence & Market Data

The "Supply Shortage" thesis is supported by recent industry reports.

1. HBM Cannibalization Effect TrendForce and other research firms have highlighted that the HBM capacity expansion is limiting the growth of conventional DRAM bit supply.

2. The Fear of Shortage Major tech publications have reported that the hunger for HBM is causing anxiety about shortages in other memory sectors.

3. Micron's Market Share Gains Reports indicate Micron is successfully effectively ramping up production to meet this spillover demand.


6. Conclusion: Buy the "Structural" Shift

The market is pricing Micron as if the cycle will peak soon. However, the data shows that capacity constraints at Samsung and SK Hynix will last until at least 2027.

This is not a typical cycle; it is a structural repricing of memory assets.

  • Current Price: ~$345

  • Target Price: ~$452

  • Strategy: Strong Buy. Use any short-term volatility to accumulate positions.

Disclaimer: This analysis is for educational purposes only and does not constitute financial advice. All valuation models involve assumptions that may not materialize.

 
 
 

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