Should I buy Nasdaq stock Micron for my ISA after blowout Q2 earnings?

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It’s honest to say that Nasdaq chip inventory Micron (NASDAQ: MU) is scorching proper now. During the last 12 months, it has surged about 350% amid an AI-related reminiscence ‘supercycle’.

Now, I’ve utterly missed out on these explosive positive factors sadly. Might the tech inventory nonetheless be price shopping for for my ISA although?

Blowout earnings

Final night time (18 March), Micron posted its earnings for the second quarter of its fiscal 2026 12 months. And so they blew the doorways off Wall Road expectations.

For the quarter, income got here in at a report $23.86bn, up 196% 12 months on 12 months. In the meantime, adjusted earnings per share got here in at a report $12.20 – miles forward of the consensus forecast of $9.31 – versus $1.56 a 12 months earlier (+682% 12 months on 12 months).

Commenting on the earnings, CEO Sanjay Mehrotra stated: “Within the AI period, reminiscence has turn out to be a strategic asset for our prospects.” He added that the corporate expects “important information once more in fiscal Q3.”

Zooming in on the steering, the corporate stated that for Q3, it expects income of $33.5bn plus or minus $750m (implying year-on-year progress of over 250%) and diluted earnings per share of $19.15 plus or minus $0.40. Analysts had been anticipating $12.05 in earnings per share on $24.3bn in income so this steering was means above estimates.

The inventory nonetheless appears to be like low-cost

So clearly, Micron is benefitting from the AI increase. What’s occurring is that demand for reminiscence is surging because of excessive demand for GPUs made by the likes of Nvidia, which require reminiscence to energy generative AI fashions.

What’s attention-grabbing is that the inventory nonetheless appears to be like actually low-cost. Presently, it trades on a forward-looking price-to-earnings (P/E) ratio of simply 7.3 utilizing subsequent monetary 12 months’s earnings forecast (which can go up given the momentum the corporate has proper now).

Observe that a number of Wall Road corporations have raised their worth targets for the inventory after final night time’s earnings. Each JP Morgan and TD Cowen are focusing on $550 – about 24% larger than the present share worth.

What are the dangers?

Nonetheless, whereas there’s so much to be enthusiastic about right here, there are fairly a couple of dangers. One is that the reminiscence enterprise is cyclical.

So, whereas Micron’s revenues are surging proper now, issues may shortly change. Observe that in 2016, 2019, and 2023, Micron’s revenues plummeted 12 months on 12 months.

Within the close to time period, the AI increase ought to help demand. But when Massive Tech corporations cease spending on Nvidia’s GPUs, issues may get ugly.

One other concern is that Micron simply informed traders that capital expenditures will “step up meaningfully” in fiscal 2027 with construction-related prices rising by over $10bn. This type of capex may hit earnings.

After all, after a 350% rise within the share worth over the past 12 months (the chart is parabolic and that scares me), there’s at all times the possibility of some revenue taking in some unspecified time in the future (perhaps even in the present day). That is one other threat to contemplate.