Micron Day Is Here!

**Travis Hoium** (0:02)
It's Micron Day on Wall Street. Motley Fool Hidden Gems Investing starts now.
Welcome to Motley Fool Hidden Gems Investing. I'm Travis Hoium, joined today by Lou Whiteman and Rachel Warren. And guys, I never thought I would say this, but Micron has a huge earnings report after the market closed today. This is a company that most of us just didn't pay attention to for most of the last couple of decades, but they are the company that everybody is watching at least for the next 12 hours or so. So Lou, I'll just kind of leave it there. What are your thoughts on Micron being the talk of the day?

**Lou Whiteman** (0:37)
Yeah, no pressure Micron, just the fate of the entire global stock market is on your shoulders. No pressure at all, right? So context, why am I saying that? Right now, no company is more emblematic of the AI rally than Micron. Believe it or not, the stock is up 270% this year. It's up a lot more over the last 12 months. It is the single biggest point contributor to the S&P 500 It is literally the engine that is driving this rally. But look, historically, the reason, Travis, we don't think about these companies is memory chips are commodity. And there are a lot of competitors with a lot of options for capacity expansion, a lot of people like flirting with rivals as we speak now. In the last few weeks, we've suddenly become a lot more skeptical about how much higher the AI rally can go. So back to the fate of the entire global stock market. It's fair to say, I hate to make short-term predictions, but it's fair to say that any flinch tonight when they release earnings, any disappointment would reinforce the fears that driven the sell-off in the last few days. But a strong showing, I think it might just ease concerns and draw buyers back in. You know, so good luck, Micron. Apparently, we are basing the entire AI trade on a kind of historically commoditized memory.

**Travis Hoium** (1:55)
Yeah, Rachel, this is going to be an interesting one because there's a lot of threads to pull on. You know, a lot of times you look at earnings and you go, how did the company do compared to a year ago? How did they do compared to analyst estimates? That's kind of typically how stocks react is what we're analysts expecting, what were they pricing in? And then what did the company actually report? What did they guide? There's going to be a lot more to it than that has to do with high bandwidth memory, what's happening with competitors and pricing. So what are the things that you're looking for in this earnings report that may actually extend far beyond Micron?

**Rachel Warren** (2:27)
There's a lot to look at here and it's important to note this is not the Micron of a couple years ago, right? I mean, Wall Street's guiding for a 1000% jump in earnings per share. Just kind of going to take a moment and take that in. This is not the business that we used to know. This is a newly minted trillion dollar company. They've sold out their high bandwidth memory or HBM capacity all the way through the end of 2026 They've got their advanced HBM3e chips. They're essentially digital gold. They're the backbone for that next-gen hardware like Nvidia's Blackwell architecture. This is also a company that just inked a major enterprise deal with Anthropic to power their CLOD models. Demand is very much outstripping supplies. There's a lot of pricing power there. Management has guided for an 81% gross margin. Revenue is looking to pass 35 billion for a single quarter. Just to set the stage a little bit for where the business is at, and that really brings us back to what we saw in the markets yesterday. There are a few factors at play. We had the announcement from South Korea's XK Hynex that sent shockwaves through the sector in terms of their shifting production timelines, but also we're seeing news about how competitors in China are aggressively leveraging their own semiconductor capacity. You've got major competitor CXMT. They are building out a truly massive fabrication facility with really one defined clear goal, which is to flood the global market with cheap legacy drape. They've got multi-billion dollar state investments, massive Shanghai facility, so essentially looking to out-produce established players. That's something that I think the market is worried about when it comes to the likes of Micron. What I will note though, I mean, this is a company, Micron, that's building very highly specialized, high margin, ultra complex HBM infrastructure. It's required for advanced AI applications, and we're also looking at a reality despite the pressure that it was under yesterday. This is a business that skyrocketed more than 700 percent over the last 12 months, trailing PE multiple of about 49 So I like the business. This is not a stock that's even close to being undervalued right now.