Storage Supply May Outstrip Demand And Continue Into 2028; UBS Raises Micron Profit Forecast, Optimistic About HBM's High Prosperity And Increased Buybacks!

UBS maintains Micron's $1,625 target price and reiterates a buy rating. Valuation logic adjustment: The forward NTM P/E ratio assumption has been lowered from 11 times to 8 times, anchoring on earnings per share for fiscal year 2029, with long-term agreements building resilience in earnings across cycles. 

The report raises Micron's revenue forecast for Q4 FY2026 to $52.4 billion and earnings per share to $32.50, respectively, exceeding market expectations by 3.9% and 4.3%. Both indicators exceed company guidance, with profit gains mainly driven by improved product pricing; By business breakdown, DRAM segment revenue is expected to be $39.7 billion, HBM revenue about $3.5 billion; NAND business revenue is $12.7 billion. This quarter's gross margin is estimated at 87.6%, 160 basis points higher than the company's 86% guidance.

For the next fiscal quarter, UBS forecasts Micron's revenue guidance range at $58.059 trillion, with gross margin rising another 100 basis points quarter-over-quarter to 88.86%. Looking ahead, institutions have raised their earnings per share forecasts for fiscal years 2027, 2028, and 2029 to $184.19, $274.97, and $219.15 respectively, significantly exceeding market consensus expectations. Gross margin is expected to peak at 91% in Q4 of fiscal 2027 and Q1 of fiscal 2028, corresponding to gross margins of 85.6%, 90.2%, and 89.5% for fiscal years 2026, 2027, and 2028. 

For HBM, the 2027 fiscal year HBM bit shipment forecast is 11.72 billion GB, slightly upward from previous estimates. Nvidia's next-generation VR300GPU memory specifications have been reduced; the first-generation product only comes with 384GB HBM4, which will be upgraded to 512GB HBM4E in Q3 2027, below the previous 768GB market expectation. However, limited HBM supply can be allocated to more GW-level server racks as a hedge. Meanwhile, suppliers continue to raise the premiums for HBM and DDR, expecting the average combined HBM price to rise about 76% year-on-year in fiscal year 2027, with HBM4 at about $30/GB and HBM4E at about $33/GB.

Market Insight:

Capital expenditure for fiscal year 2027 is estimated at $51 billion, with capital intensity remaining low at double digits. Due to the U.S. CHIPS Act, Micron's buyback ban will be lifted on December 9, 2026. The report judges the company will not release buyback signals in advance; It is expected that buybacks will begin in the second quarter of fiscal year 2027, with an initial scale of about $20 billion per quarter, and by the end of fiscal year 2027, it is expected to rise to nearly $50 billion per quarter.