Micron Technology, Inc. - Our Calculation Of Intrinsic Value

Each week we run a DCF (Discounted Cash Flow) model on a company from our watchlist. This week’s pick: Micron Technology, Inc. (MU).

Profile

Micron Technology is one of the world’s leading semiconductor memory manufacturers, designing and producing DRAM, NAND flash memory, and storage solutions used across data centers, artificial intelligence infrastructure, personal computers, smartphones, automotive systems, and industrial applications. The company plays a critical role in enabling next-generation computing, with memory demand continuing to grow as AI workloads become increasingly data intensive.

While memory remains a cyclical industry, Micron continues investing heavily in advanced manufacturing technologies, high-bandwidth memory (HBM), leading-edge DRAM, and next-generation NAND products to support long-term growth driven by artificial intelligence and cloud computing.

Micron’s business model is driven by:

• DRAM memory products

• NAND flash and storage solutions

• AI, cloud, and data center demand

• Automotive and industrial semiconductor sales

Micron’s competitive advantages include:

• One of the world’s leading memory semiconductor manufacturers

• Technology leadership in DRAM and NAND

• Significant manufacturing scale and cost efficiencies

• Strong balance sheet with low net debt

• Exposure to long-term AI and data center growth

The business also benefits from long-term structural tailwinds including accelerating AI infrastructure investment, increasing memory content per device, cloud computing expansion, and growing demand from automotive and industrial markets.

DCF Analysis

Inputs:

Discount Rate: 9%

Terminal Growth Rate: 3%

WACC: 9%

Forecasted Free Cash Flows (in billions USD)

Micron is emerging from the downcycle in memory markets with significantly improving profitability and cash generation as AI-driven demand accelerates. While free cash flow remains cyclical, long-term industry fundamentals appear considerably stronger than previous cycles.

2027: $8.0 → PV: $7.3B

2028: $10.0 → PV: $8.4B

2029: $12.0 → PV: $9.3B

2030: $13.5 → PV: $9.6B

2031: $15.0 → PV: $9.7B

Total Present Value of FCFs = ~$44.3B

Terminal Value Calculation

Using the perpetuity growth model with 2031 FCF of $15.0B:

TV = (15.0 × 1.03) ÷ (0.09 − 0.03)

Terminal Value ≈ $258B

Present Value of Terminal Value ≈ $168B

Enterprise Value

Enterprise Value = $44.3B + $168B

Enterprise Value ≈ $212B

Net Debt Position

Cash & Equivalents: ~$10.3B

Total Debt: ~$15.3B

Net Debt ≈ $5.0B

Equity Value & Per-Share Value

Equity Value = $212B − $5.0B

Equity Value ≈ $207B

Shares Outstanding: ~1.12B

Intrinsic Value per Share ≈ $185

Conclusion

DCF Value: ~$185

Current Price: ~$742

Margin of Safety: ~-75%

Micron remains one of the highest-quality businesses in the global semiconductor memory industry. The company is benefiting from a powerful recovery in memory pricing, rapidly expanding AI infrastructure investment, and growing demand for high-bandwidth memory used in advanced AI accelerators.

Management continues investing aggressively in leading-edge manufacturing, advanced packaging technologies, and next-generation memory products, positioning Micron to benefit from secular growth in artificial intelligence, cloud computing, automotive electronics, and data centers. The company also maintains a strong balance sheet with a net cash position, providing financial flexibility throughout industry cycles.

The long-term outlook for memory demand appears stronger than in previous decades as AI significantly increases memory requirements across virtually every computing platform. Micron’s technology leadership and manufacturing scale should allow it to participate meaningfully in this growth.

While the long-term business outlook remains attractive, much of that optimism appears reflected in the current share price. A conservative discounted cash flow analysis suggests investors are paying a substantial premium for Micron’s AI-driven growth prospects and expected earnings recovery.

For long-term investors, Micron remains an exceptional semiconductor company with durable competitive advantages and significant exposure to AI. However, from a valuation perspective, the current market price appears to offer a limited margin of safety under conservative discounted cash flow assumptions.