Portfolio: Zacks Focus List

Micron’s investment thesis centers on its dominant position in high-bandwidth memory (HBM), which has become the critical bottleneck in AI infrastructure buildout. The company’s entire HBM production capacity for 2026 is fully sold out, and it is already negotiating supply agreements for 2027, giving it exceptional revenue visibility rare in a historically cyclical industry. Q2 FY2026 revenue hit a record $23.86 billion — up ~196% year-over-year — with Q3 guidance of ~$33.5 billion and gross margins over 80%, reflecting the most severe demand-supply imbalance Micron’s own management has seen in 25 years. Micron can only fulfill 50–66% of key customers’ requests, giving it meaningful pricing power.

The company is committing over $25 billion in CapEx in FY2026 alone, with FY2027 spending rising by more than $10 billion — dramatically raising the fixed-cost base and future utilization hurdles. At a forward P/E of only 5x, the current price reflects purely present-year earnings, which have a high degree of visibility due to the company’s large backlog. Further growth, as such, is not yet priced in, in our view. We view the current ~30% share price decline from recent highs, which have occurred largely as a result of the ongoing hostilities in the Gulf region but also on concerns about pricing sustainability, as an attractive buying opportunity as the company is enjoying a multi-year demand cycle, which could possibly last into 2030.