UBS Says Micron Could Buy Back Nearly Half Its Stock. Why I’m Not Counting on That MU Catalyst.

Micron (MU) stock has been on a downward trajectory since the June 24 earnings report. I previously reported that the selloff won’t last long, though the stock has since declined further. This decline in price has started receiving attention on Wall Street as well, with UBS analyst Timothy Arcuri forecasting that the company could generate as much as $400 billion in free cash flow through the end of calendar year 2028. The amount of money, especially for a business like Micron that has had its fair share of downturns in the past, is staggering. The analyst believes the company could retire as much as 40% of its outstanding shares using this money. While MU stock is rebounding as a result of this development, let me dive deeper into why the UBS comment requires a little more scrutiny.

To begin with, Micron is restricted from buying back its own shares other than minor buybacks that offset dilution from employee stock options. This means its cash will sit on the books for some time, providing a massive spring-loaded catalyst for 2027. That is as bullish as it can get for the company, because it will have increased its cash pile by the time the buyback restriction is lifted. It is true that the same cash is competing for debt reduction and expansion. But the company is aggressively buying back debt as the Chips Act doesn’t impose any restrictions on that. Its expansion projects are controlled owing to the boom- and-bust nature of memory cycles, and the company said in its latest earnings report that it does not foresee spending more than $50 billion per year on expansion.