DCF Studio

    MU · NMS · Technology

    Micron Technology, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 0.97

    Market price

    USD 1015.80

    Implied upside

    -99.9%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Wrong toolThis model values the shares at 0.1% of the market price. A gap that size is a modelling failure rather than a view - most often an unusable beta, a currency or units mismatch, or a cashflow base that does not represent the business. Read the figures below as diagnostics, not as a call.
    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 41.1% of revenue against depreciation of 31.6%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Current EV/EBITDA of 63.4x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 0.97-99.9%
    Exit multiple
    USD 180.90-82.2%
    Market price
    USD 1015.80

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    -1875329596-9376647980FY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 39.9bnUSD 42.6bnUSD 45.4bnUSD 48.5bnUSD 51.7bn+6.7%
    EBITUSD 2.8bnUSD 3.0bnUSD 3.2bnUSD 3.4bnUSD 3.6bn+6.7%
    NOPATUSD 2.5bnUSD 2.7bnUSD 2.8bnUSD 3.0bnUSD 3.2bn+6.7%
    Add depreciation & amortisationUSD 12.6bnUSD 13.4bnUSD 14.4bnUSD 15.3bnUSD 16.3bn+6.7%
    Less capital expenditureUSD -16.4bnUSD -17.5bnUSD -18.7bnUSD -19.9bnUSD -21.3bn+6.7%
    Less increase in working capitalUSD -136.2mUSD -145.4mUSD -155.1mUSD -165.6mUSD -176.7m+6.7%
    Free cashflow to firmUSD -1.4bnUSD -1.5bnUSD -1.6bnUSD -1.8bnUSD -1.9bn-6.7%
    Discount factor0.93310.81230.70720.61570.5361-
    Present valueUSD -1.3bnUSD -1.3bnUSD -1.2bnUSD -1.1bnUSD -1.0bn+7.1%
    Present Value Of The ForecastUSD -5.9bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.819Reported 2.222, pulled toward 1.0 (Blume)
    Cost of equity15.00%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 1147.2bn98.7% of capital
    Total debtUSD 15.3bn1.3% of capital, book value as a proxy
    Tax rate11.6%Effective, capped at statutory
    WACC14.86%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 0.97

    196% of EV

    Forecast FCFF, final year
    USD -1.9bn
    Capex at depreciation, working capital in reinvestment
    USD 3.2bn
    Less reinvestment at g/ROIC (16.8% of NOPAT)
    USD -542.5m
    Capitalised
    USD 2.7bn
    ROIC (WACC floor)
    14.9%
    Terminal value, undiscounted
    USD 22.2bn
    Terminal value, discounted
    USD 11.9bn
    Enterprise value
    USD 6.1bn
    Less net debt
    USD 5.0bn
    Equity value
    USD 1.1bn

    Exit at 20.0x EBITDA

    Value per shareUSD 180.90

    103% of EV

    Terminal value, undiscounted
    USD 399.8bn
    Terminal value, discounted
    USD 214.3bn
    Enterprise value
    USD 208.5bn
    Less net debt
    USD 5.0bn
    Equity value
    USD 203.5bn

    Spread between methods: 198%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    12.86%3.323.403.493.573.66
    13.86%1.972.032.092.142.20
    14.86%0.870.920.971.031.08
    15.86%-0.06-0.020.030.080.12
    16.86%-0.86-0.82-0.77-0.73-0.69

    Outlined: this model. Green text: above today's price of 1015.80. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Discount rate14.9%2.7%-12.2pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.