Micron Locks In Long-Term Contracts at 85% Gross Margin as Memory Shortage Pushes Valuation Rerating

According to Barron's report, Micron Technology achieved a gross margin of 85% this quarter and expects it to rise to 86% next quarter, with analysts projecting potential stock price doubling if valuation multiples reap to S&P 500 levels. On Wednesday, CEO Sanjay Mehrotra said the company signed 16 long-term supply contracts over three to five years with price floors and customer cash deposits, locking in profitability through 2030.

These contracts are expected to contribute about 40% of revenue once fully effective, with price floors set well above Micron's previous peak quarterly margin of 61% in Q4 2018. Among 42 analysts tracked by FactSet, 35 significantly raised earnings estimates after the earnings release, with consensus EPS for the next fiscal year jumping to $144.27 from $101.74 the previous month.