Freedom Broker has maintained its Buy rating on Micron Technology (NASDAQ: MU) along with a $1,600 price target.
Analyst Egor Tolmachev believes that Micron's fiscal fourth-quarter 2026 results and its fiscal first-quarter 2027 guidance both came in better than expected. More importantly, company management anticipates that memory supply-demand conditions in 2027 and 2028 could be even tighter than in 2026, and the currently expanding long-term contract backlog is reinforcing this view.
Micron's fiscal fourth-quarter revenue, gross margin, and earnings per share all exceeded market consensus and the upper end of the company's own guidance range, with rising prices being the primary driver of the earnings beat. The company's fiscal first-quarter 2027 revenue and EPS guidance also topped market expectations, indicating that current memory prices and demand remain strong.
Freedom Broker believes the industry's real bottleneck is not insufficient demand, but rather that capacity expansion is constrained by cleanroom space. Even if memory manufacturers want to increase bit supply, they must first complete new cleanroom construction and related equipment installation, so new capacity cannot be released quickly. This is also an important reason behind management's assessment that the market may tighten further in 2027 and 2028.
Meanwhile, Micron's long-term contract backlog is growing significantly. The company currently has 26 supply agreements, with remaining performance obligations of approximately $150 billion, customer commitments amounting to $32 billion, and new contracts are essentially being signed at current market prices. In a tight supply environment, these contracts not only improve visibility into future revenue but also mean Micron can lock in current elevated memory prices in orders for a longer period.
However, strong growth comes with notable cost pressures. The company expects approximately $1 billion in cost headwinds to make fiscal first-quarter 2027 the low point for gross margin for the full year, and operating expense growth in fiscal 2027 will also exceed previous guidance. Capital expenditure pressure is equally significant. Micron expects fiscal 2027 capital expenditure to exceed $50 billion, a considerable portion of which will go toward cleanroom construction. But these investments will not translate into actual new capacity until late 2028, meaning supply constraints will be difficult to ease quickly over the next two years. This also explains why multiple institutions have recently simultaneously emphasized supply-demand tightness in 2028. DA Davidson raised its Micron price target to $2,100, Bernstein maintained an Outperform rating with a $1,300 price target, UBS maintained a Buy rating with a $1,625 price target, and Baird and Cantor Fitzgerald also continued to stress that the DRAM and memory markets may remain undersupplied in 2027 and 2028.
Therefore, the core of Freedom Broker's Buy rating this time is not merely Micron's better-than-expected quarterly earnings, but its judgment on the supply-demand structure over the next two years: current memory demand remains strong, while truly effective new capacity will not be gradually released until late 2028. Before that, supply constraints, rising contract prices, and order lock-ins may continue to support Micron's revenue and profits. The biggest cost is that the company will need to bear higher capital expenditure, operating expenses, and short-term cost pressures.