Micron Technology (MU) has delivered again, and the valuation still looks cheap. In June, I didn't buy the stock despite record numbers. Today I see it as a buy, but explicitly only for an active trading approach. As an investment for years, I still don't see it.

The numbers released on September 30 are simply enormous. In fiscal year 2025/26 (ending in early September), revenue rose from $37.38 billion to $133.19 billion, up about 256%. Adjusted net income jumped from $9.47 billion to $86.76 billion, an increase of more than 800%. Adjusted earnings per share rose from $8.29 to $75.52. The adjusted operating margin climbed from 29% to 76%. Even so, the stock opened slightly lower on October 1.

What still impresses me more than the numbers are the strategic customer agreements (SCAs), the multi-year take-or-pay contracts with firm commitments and deposits. They create a stability this market has never had before. At heart, memory chips are a commodity business: highly cyclical and price-driven. Micron has now signed 26 such contracts, up from 16 in June. By current estimates, they cover over 35% of revenue through 2030, and the target remains around 50%. For three quarters of SCA revenue, a fixed price range applies. The paradigm shift taking shape in the industry seems to be becoming real. On top of that, the market remains tight. Micron expects an even tighter situation in 2027 and 2028 than in 2026. Customers want to secure supply beyond 2030, and SCAs through 2031 already exist.

Based on expected operating cash flow per share of $155.88 for 2026/27, the price-to-cash-flow (P/CF) ratio is 6.8, measured against the closing price of $1,065.11 on September 30. That is still slightly above the historical average of 6. For the next two years, estimates imply a P/CF ratio of 5.8 and 4.4. On average, analysts expect operating cash flow per share to grow by over 45% per year from 2026/27 to 2028/29. Even if growth slows to around 24% per year in the last two of those years, there is room to the upside. In the memory chip industry in particular, new technologies or changes in supply, demand and prices can quickly shift these estimates. The historically low valuation of memory stocks is partly due to that.

On the earnings call, a Bank of America analyst raised this concern: the market fears 2027 could mark the peak for prices and profits. Micron counters that supply will be even tighter in 2027 and 2028. I don't know who is right. The SCAs could dampen the highly cyclical nature of the business, though. What remains is growing competition. Chinese manufacturers like CXMT are expanding capacity and could, sooner or later, put pressure on prices. How quickly sentiment can turn was on display this summer. From its all-time high in late June to the correction low in late July, MU stock lost around 40%. It has since recovered most of that, but high volatility is likely to stay.

That is exactly why Micron is a trade for me, not an investment. Fundamentals, a cheap valuation and the rebound since July currently speak for the stock. Whether the SCAs will truly turn a cyclical into a predictable business will only show in the next downturn. When it comes is open. That it comes, I'm fairly sure. So I see Micron as a buy, but only as part of an active trading approach.

Is Micron Technology a buy? For active traders, yes. I see MU as a buy for a trading approach, not as a long-term investment. The stock trades at a price-to-cash-flow ratio of 6.8 for fiscal 2026/27, slightly above its historical average of 6, falling to 4.4 by fiscal 2028/29 on current estimates. The biggest risk is that memory prices and profits peak in 2027, as some analysts fear, while Chinese competitors like CXMT add supply.

Disclaimer: This newsletter is for informational purposes only and does not constitute investment advice. I am not a financial advisor. Always do your own research before making any investment decision.

Disclosure: I may hold direct or indirect positions (including options) in any securities mentioned in this newsletter. My opinions are my own and always honest.