EM Reacts to Micron Stock Exploding right Now | $MU

Ajouté : 2026-05-28

[00:00:00]Welcome everybody. I'm Sam. I am filling in for Paul while he is on his trip. We have a lot of interesting stories going on in the market today. Number one, if you haven't noticed, semiconductor stocks are booming, being led by a couple very cyclical names that are up close to a,000% from their lows just a few short years ago. In addition to that, we have a company that's actually very well known for the returns it's provided over a 20 to 30-year period that is down close to 10% on a double beat on earnings. So, we're going to check that out as well. And then two other pretty interesting stories I think you guys are going to really like. All right, to get started, like I said, semiconductor stocks are up huge. So, I think on is up like 9%. You can see on the screen right behind me, Micron is up 18%. I got the notification on my phone that they surpassed a $1 trillion market cap from where they were just a few short years ago, not that long at all, of 70 billion. It's crazy to see how quickly things can swing in a growing industry, right? They have all of the AI tailwinds behind them, but remember it's cyclical, right? So, at the bottom, things look like they're at their worst and at the top things look like they're at their best. As an investor, your job is to do the due diligence to understand the company and understand how those demand cycles work. So guys, I have the chart pulled up. This is on the five-year view. But what you need to understand here is look at this consolidation, right? So when you're looking at heavily cyclical businesses when it's sitting at $60 a share, I think it got as low as 48. But this is like a fouryear plus four to five year period where it did basically nothing but consolidate. And at that time the fundamentals look like their worst, right? The supply was massive. There was an overupp of memory chips, you know, DRAM and nan chips. But on top of there being an over supply, there was significantly lower demand, right? And what happens is revenues falling during this period. You're seeing negative profit margins. On top of that, you know, that means that the balance sheet looks worse compared to the ability to pay off the debt. Everything looks worse. the returns on invested capital look worse. What you have to understand as an investor is how cycles work, right? So, same thing goes right here.

[00:02:12]What investors like to do is they'll look at Micron here when all the fundamentals are bad and they'll perpetuate that out into the future, right? They'll assume that the future's not going to look great. And at the top, where we are right here, what you're seeing everybody start to talk about that you need to make sure you don't get caught up on is that the future is going to continue to always look great. So I was listening to an interview just earlier today with the CEO of Micron and he was discussing the demand that they currently have because if you don't know they are building out within the US right so they're investing over hundred billion dollars in the US to build out production so that they can bring 40% of their business onshore. Micron is the only US producer of memory chips. The other two main competitors in the industry are Samsung and SKH. So what happens is the industry is consolidated, right? So there used to be far more players and the industry was way more spread out. Each one had a small sliver.

[00:03:08]What happened is they would price each other out, right? A bunch of them went out of business or they got acquired and now there's only three main players left. So now when the demand grows, there are smaller amount of players to supply it. So, the CEO said in this interview I was listening to that currently they're only able to meet 50 to 65% of the demand of what customers need and that he expects this kind of peak level demand to continue through the rest of 2026. But I want you to notice something because what other CEOs of companies will talk about, right, ones with longerterm trajectories, they'll talk about two-year guidance, threeear guidance, fiveyear guidance, what the company's doing into the future. He's talking about the next six months because it's hard to forecast how that demand will play out. And what you need to remember is if you're looking at the top, the value proposition is not the same at $800 plus dollars a share as it was when it was trading at $60 a share, which is around the company's book value. So guys, when I was talking about earlier that things look their worst at the bottom of the cycle, right at the trough, and they look their best at the peak, in reality, from an investor lens, it's kind of the opposite. This kind of shows it. So you can see that look at the 5-year price to free cash flow. Look at the 5-year P 140 times to 320 times, right? That's a massive multiple, but that's because the profit of the company had fallen. So if we come in here and we go look, this is what I would pull up. I would come in, I'd look at the financials, and I'd come look at the income statement or the cash flow statement. And this is, you can see all the way back to 2016.

[00:04:42]So you can see here right at the peak you saw $14.6 $6 billion in net income all the way over here, right? It fell off a bit, but that being said, still multiples of billions of dollars. Just two years ago, they're losing $5 billion. Now, they're producing something like on pace for $40 billion per quarter in revenue. So, that's why things swing so quickly. So, when I showed you the eight pillars, the ROIC is only 4%. The debt load load looks heavier. What you need to remember is what is it going to look like when the cycle turns and then understand how long the cycle can potentially last, right? And then compare that to value, which is what we're going to do right now. So guys, one more thing before we get to the actual stock analyzer and rerun it. And I'll give you a breakdown of what price would be interesting for this business for me. And I'll actually tell you an interesting story from a few years ago. But if you look at it, you can see right here, analysts expect 2026 to be this massive, massive peak in demand. and then demand to continue to grow, but the growth slows a bit into 2027. 2027 should still be a great year for the company, but then analysts, you can see there's 27 in year number three, expect that the demand for the product will decline. And as the demand declines, you're also seeing right now, if you go listen to the Micron CEO talk, if you read their earnings report, they are building out supply in massive ways. So they are spending today understanding that they're going to be able to meet this growing demand for two years and then demand may fall back down but they need to spend today to be able to meet their customer demand so that they don't lose market share right because if Samsung or SKhina can come in and they can provide 100% of the demand that the customers have while Mikon can only comp um provide 50% or so then obviously they're going to lose market share. The goal is to capture market share when something like this happens. Develop long-term relationships with the customers and long-term contracts to provide product for them at set prices. Okay guys, so I have our stock analyzer pulled up and I have two kind of unique stories for you.

[00:06:42]Number one, years back when I was actually studying Micron heavily, this was probably 3 to four years ago, I was waiting to buy at 4750 and it got down to as low as $48 and I did not pull the trigger. So that's a lesson, right?

[00:06:57]That's one of the lessons that I've learned over time is that when you're buying a company at a deep deep significant discount to value, right, 50% plus margin of safety, you should not be pinching over pennies. Now, story number two, Dalton, one of our other in-house analysts at Everything Money, covered Micron in an exclusive content video, and it caused a lot of conversation in the community just four months ago when Micron was trading around $70 to $80 a share. and he walked through the thesis on the cyclical play here and why when Micron reaches, you know, peak demand, when the memory chips are at peak demand, this stock could very well be worth $300 to $400 per share. And that a lot of community members really took to what he was saying and understood it and studied the company more. Now, I have some stock analyzer assumptions right here. This is on a five-year view, right? Because like I said, cycles. We don't want to just talk about a 10-year view for a company like Micron because it can eb and flow a lot. So, I have strong growth here 10% to 16%. Margin stabilizing more on this 5 to 10 year view, right? There's going to be a short period for the next 1 to two years where it's much higher. Then it'll probably dip down to much lower like you saw in analyst estimates. And then 15 to 21 on earnings and free cash flow and a 9% expected return. And that gets us to All right. So, here's what I'm saying at the bottom. So this thing traded between 48 and $80 up until like the last nine months. How attractive would that have looked if you put in the assumptions in stock analyzer for what the middle to peak levels of the cycle would look like for Micron and just recognize that you're going to have to wait patiently, right? You're going to have to buy and you're going to have to practice patience. You're not going to be able to look at it every day and say, "Man, why is Micron not moving yet?" You just have to wait to see the actual cycle turn.

[00:08:48]200 to $475 per share. So if you were buying in the $48 to $80 range around book value of the company, it's a heads I win, tails, I don't lose much. Monish Pabry, Leelu, they actually said that they had conversations with Charlie Munger about it and they called it like getting God's approval when Charlie agreed with the idea behind it because again, all you have to do is be patient and wait. Now remember today at $800 a share plus it's not the same value proposition even though the company is in a much better situation. Now our second story for today Autozone guys this is a company that has compounded at over 25% during a 25 plus year period.

[00:09:26]How have they done that? Paul actually just sent a text in our everything Money group chat earlier saying that this is one of the great cannibals that has ever existed in the stock market. So what that means is and I will show you by showing you that their shares outstanding have decreased so significantly. Right? So when you talk about earnings per share you have income on top as the numerator and then you have shares outstanding as the denominator right so there's two ways to increase EPS increase your income or decrease your shares outstanding. So companies like AutoZone, like NVR have bought back massive amounts of shares while the company has grown at steady rates. Now, luckily, they've traded at low multiples, like six to 10 times earnings, which allows them to buy back somewhere between say 10% and 15% of the business each year consecutively. So, I'm going to show you really quickly what that looks like. So if you come down here, you can see shares outstanding just 10 years ago was about 30 million. Now today we're down to 16 million. So they have decreased it in half in just a 10-year period. That means that if your income stayed steady, your EPS would still have doubled over that time period. Now I am getting our AI feed right here on our Everything Money software showing me that they just reported Q3 earnings. That's why the stock is down. That being said, net income came in at $641 million, $38 in EPS, which completely surpasses annual expectations of $36.

[00:11:02]And that net sales increased 8.4% year-over-year to 4.84 billion driven by this is pretty great stuff, right? Same store sales of 4.1%. That's what we want to see. They are growing. The stores have been operating for over a year and they are opening new stores because the demand is there. Now, eight pillars looks pretty good, right? ROIC is absolutely massive. Why is that? Again, that's because they're a very profitable business, but they're reducing the float over time. Shares outstanding, bought back 20% in just the past 5 years.

[00:11:32]Reasonable price free cash flow and PE ratio, growing income, growing revenue.

[00:11:36]Cash flow is down a little bit. I'd be interested to understand why that is if you're investor, right? Go do more research on that. long-term liabilities divided by five-year free cash flow is a little high, but that's nothing that really concerns me all that much based on how this business model operates. So, you can see here, guys, I have analyst estimates pulled up. Look at this.

[00:11:52]They're expecting really, really consistent revenue growth. Now, what I'll tell you is I just looked at the EPS estimates. Same thing, but at a higher rate. And you may ask, why is that? One of two things. First off, it could be because as the business scales, there will be benefits of that and margins will improve over time. The other thing is share buybacks, right? So if they grow 8% a year topline, but they buy back say 3 to 4% of the float each year, well then all of a sudden you're at 10 to 11% growth. Very simple. So let's quickly run stock analyzer. Okay, so here's what I did for stock analyzer.

[00:12:28]Consistent revenue growth pretty much in line with what analysts are expecting and what the company just reported.

[00:12:34]Profit margins again sticking around what we've seen, right? We've seen a little bit of pullback over the past one year. Go read and figure out why that is and determine if you think that margins will get back to where they were on the five and 10 year basis or if they're going to stay at this lower number. And then a multiple. I think this is a high quality business that I would love to own. So I started at the market average of say 15 to 16 times earnings. It went up to as high as 21, which would be a premium. And then finally 9% desired return. Let's check it out. So this is one that I'm going to go talk with our Everything Money community members about. I'm gonna go have a conversation and figure out what price they're interested in buying at now, right?

[00:13:08]because you've got between a 7 and a 14% 10-year expected return. I want to go do more research. I want to figure out what the future of the company looks like and what price I need to pay today to achieve the returns that I want to put it in my portfolio. So guys, now we have covered those two companies, Micron and Autozone. We are on to two of our really interesting stories that we've seen lately. First one being Schwab's retail client report. So this is showing the sentiment about the stock market from Schwab's client base. You can see that they've turned a bit more bearish. So number one right here, you can see 28% of their clients are bullish on the US stock market, down from 41% in Q1, and 58% are bearish compared to 41% before.

[00:13:52]So what is that showing? That is showing that people are not as confident. But here's the one thing I'll say. This is the disclaimer to it. 82% said they would still be buying the dip in the US stock market. So people are not as confident right now in the short term, but they have this bias because of how well the market has recovered over the past five, 10, 15year period, right?

[00:14:15]When the market dips a bit, people buy in and it recovers. That's all that the last 15 years tell you. Now, obviously, if you look back to 2008, 2009, if you look back to two early 2000s, the market can take really real hits, right? The market can absolutely crash. Which leads me into our last piece, our last story for today, which is the valuation and record highs we're seeing in the market versus where consumer sentiment is right now and if it's setting up for something bigger. So, this article comes from the Wall Street Journal. I'm going to read you the title really quick because it's it's eye popping. The stock market has never been so good when people have felt so bad. So, I want to show you a couple of charts that really break this down.

[00:14:54]Well, this is why I personally loved this article.

[00:14:58]So, this is the cycllically adjusted PE ratio. Paul talks about it all the time, right? The Schiller PE, which is here's the all-time high. We are just off of it. So, this takes the 10-year average earnings of the stock market, adjusting it, right, for the cycles that we see, and compares it to the current market cap of the S&P 500. You can see right here, we are over 40 times right now.

[00:15:20]So, this is just like Schwab said, right? People are being more bearish, right, about the market in the near term. You can see right here that consumer sentiment is at the lowest level it has been in over 35 years.

[00:15:32]Guys, it was higher during 0809.

[00:15:37]It was higher during COVID than it is today. Yet valuations, Schiller PE ratio, Warren Buffett indicator, the stock market to GDP are at all-time highs. And the stock market itself has recovered fully year to date from that little dip that we saw and is already back to all-time highs. So guys, if you enjoyed this content, you enjoyed this coverage, and you want to see a video that we just released where Paul himself covers exactly what has happened historically when the market is set up just like this. It brings up perspective from Buffett, from Bur, from many super investors. Go check out our video that just came out. There will be a link to it in the description. It'll pop up on your screen right now. Thank you for watching. Come have a chat with me in the