Micron(MU) Stock Drops 14% in One Week – Should Investors Consider Buying the Dip?

TLDR

• Micron posted Q2 revenue of $23.9 billion and EPS of $12.20, surpassing estimates by 21% and 36%
• Guidance for the May quarter stood at $33.5 billion in revenue and $19.15 in EPS, outpacing forecasts by 42% and 70%
• Gross margin is projected at 81% for Q3—exceeding Nvidia’s 75%
• Both Citi and UBS raised their price targets to $510, with Cantor Fitzgerald going as high as $700
• Even with the stellar quarter, MU fell roughly 4% in after-hours trading due to capex worries and fears that margins have peaked

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(SeaPRwire) –   Micron Technology released one of the strongest quarterly earnings reports in its history, but the stock declined. That’s the type of development that makes you pause and reconsider.

Micron Technology, Inc. (MU)

The memory chip manufacturer announced fiscal Q2 revenue of $23.9 billion—representing a 196% year-over-year increase and a 75% jump from the previous quarter. Adjusted EPS was $12.20, a 682% rise from the prior year’s same period.

These figures exceeded Wall Street estimates by 21% for revenue and 36% for earnings.

CEO Sanjay Mehrotra stated that revenue for DRAM, NAND, HBM, and every business unit reached new records. The expansion of AI data centers is fueling nearly unquenchable demand for high-bandwidth memory and storage solutions.

In spite of all this, MU dropped approximately 4% in after-hours trading following the earnings release.

Two factors worried investors. First, Micron increased its capital expenditure guidance for fiscal 2027. Second, there were concerns that gross margins might be reaching their peak—even though 81% is an exceptional number for a hardware maker.

The stock had already soared 354% over the past year leading up to the earnings report, so some profit-taking was also anticipated.

Analyst Reaction

Citi analyst Atif Malik maintained his Buy rating and lifted his price target to $510 from $430, pointing to better-than-anticipated margins. He characterized the key question as whether MU can continue to rise alongside DRAM prices—driven by AI demand and limited new fab capacity—or if prices will weaken after a strong Q1 performance.

Malik also noted a possible short-term shift into semiconductor capital equipment stocks due to the higher capex forecast.

UBS analyst Timothy Arcuri also increased his target to $510 from $475, retaining a Buy rating. He was more cautious, observing that with gross margins now over 80%, much of the potential upside from additional quarters of beating estimates and raising guidance may already be priced into the stock.

UBS also highlighted new long-term customer contracts Micron has signed, including a five-year deal—longer than UBS had anticipated. The firm interprets these agreements as a sign that customers consider memory to be strategically vital.

Several other analysts followed suit with upgrades. Cantor Fitzgerald established a target of $700. Rosenblatt raised theirs to $600. Wolfe Research increased to $550.

Outlook and Valuation

Guidance for the May quarter was the standout figure. Micron expects revenue of $33.5 billion and EPS of $19.15—surpassing forecasts by 42% and 70% respectively.

Gross margin guidance was roughly 81%, up from 38% in Q3 of fiscal 2025 and 75% in Q2 of fiscal 2026.

Based on forward price-to-earnings ratio, MU trades at just 8x—historically low for a stock growing at this rate. However, some analysts see a single-digit forward multiple for a cyclical chip stock as a red flag rather than a buying chance, since the market typically prices in a peak long before it actually happens.

UBS has a historical perspective that Micron usually reaches its peak about nine months before margins hit their highest point.

In the most recent trading session, MU was at $443.52 before dropping back to $395.14.