Memory chip stocks keep falling. The profits Wall Street expects from them do not. As a result, they've gotten cheaper.
Micron's forward price to earnings has dropped to 5.6, and Micron Technology Inc. (MU) is not even the cheapest stock in the group.
Seoul-listed shares of SK Hynix Inc. (SKHY) trade at 4.1 times expected earnings, while SanDisk Corp. (SNDK) trades at 6.9 times.
Yet recent analyst actions show little retreat from bullish recommendations.
That raises a more important question than whether memory stocks look cheap: How long can the earnings behind those valuations last?
So why are the multiples shrinking if Wall Street is not cutting its ratings?
Why Micron's Forward P/E Keeps Shrinking
A forward P/E can shrink when the price falls, or expected earnings rise. For Micron, both happened.
On Sept. 30, Micron reported fiscal fourth-quarter adjusted earnings of $33.42 per share. The consensus was $31.77.
In addition, the company guided for $38.15 per share in the current quarter, plus or minus $1.
Analysts moved up to that guidance. The consensus now stands at $38.11 for the current quarter and at $174.31 for fiscal 2027.
Yet, the stock is 21% below its record high of $1,255. SanDisk is 37% below its peak, and SK Hynix's Seoul-listed shares are 46% below theirs.
Analysts Are Raising Targets, Not Cutting Ratings
MarketDash Analyst Ratings' displayed October actions for Micron, SanDisk and SK Hynix's U.S.-listed shares show no rating downgrades.
The recorded price-target changes have been increases.
D.A. Davidson analyst Gil Luria raised his Micron target to $3,000 from $2,100 on Oct. 7, maintaining a Buy rating. Mizuho raised SanDisk's target to $2,050 from $1,875 a day earlier, maintaining Outperform.
But a September move by Wells Fargo captures the valuation debate more clearly than either increase.
Wells Fargo made the one recent cut, and it points the same way. On Sept. 23, the firm lowered its Micron target to $1,400 from $1,525 and kept its Overweight rating.
The firm lowered Micron's target to $1,400 from $1,525 while retaining Overweight. At the same time, it raised fiscal 2027 earnings estimates by about 5% and fiscal 2028 estimates by more than 10%.
The Question Is How Long Profits Last
The risk is that strong prices encourage more production. If supply overtakes demand, prices and profits can fall. Hypothetically, halving expected earnings would turn a 5.6 forward P/E into 11.2, even without a share-price change.
Analysts disagree on that pricing risk.
Bernstein cut SK Hynix's target in September, citing weaker high-bandwidth memory pricing, while retaining Outperform.
"Concerns over HBM pricing also appear excessive," Mirae Asset Securities analyst Young-gun Kim said Oct. 6.
Kim expects stronger conventional-memory prices to encourage suppliers to shift capacity away from HBM, supporting prices for memory used alongside AI processors.
Micron's defense rests partly on longer customer commitments. Management said 26 multiyear agreements should cover more than 35% of revenue through 2030.
Those contracts could make future revenue more predictable. They do not protect every dollar of profit.
Not everyone agrees.
"They might be cheap, but a price bubble is a price bubble whether the stocks are cheap or expensive. The aftermath is usually worse, however, for stocks that are expensive, of course," said John Roque, technical analyst at 22V Research, in a note on Monday.
