Why Shares Of Micron Are Up By 5% Today?

Micron Video 01.04.21.

Micron Stock Gains Ground After Strong Quarterly Report

Shares of Micron gained strong upside momentum and moved closer to all-time high levels after the company provided its quarterly report.

Micron reported revenue of $6.24 billion and adjusted earnings of $0.98 per share, beating analyst estimates on both earnings and revenue. The company’s operating cash flow totaled $3.06 billion compared to $1.97 billion in the previous quarter.

In the next quarter, Micron expects to report revenue of $7.1 billion and adjusted earnings of $1.62 per share. The company’s guidance looks strong which is not surprising given the current market situation in the semiconductors segment. The world is suffering from a shortage of chips, which is a bullish development for Micron.

What’s Next For Micron?

The market situation remains favorable for Micron and other companies in the semiconductor space. Coronavirus pandemic has boosted demand for chips, while the increased demand from the auto industry supported the upside trend.

The market remains tight, and it remains to be seen whether producers will be able to ramp up supply significantly in the near term. Meanwhile, Micron will benefit from both strong demand and higher prices for its production.

Analyst estimates for Micron earnings have increased significantly in the recent months. Currently, analysts expect that the company will report earnings of $4.85 per share for the financial year 2021. For the financial year 2022, Micron is projected to report earnings of $9.41 per share so the stock is trading at less than 10 forward P/E which is cheap by modern market standards.

In this light, Micron shares have a good opportunity to develop additional upside momentum in the upcoming weeks. If Treasury yields continue their current pullback and more further away from recent highs, tech stocks will get more support, and Micron stock will have a chance to test all-time high levels at $97.50 which were reached back in 2000.

For a look at all of today’s economic events, check out our economic calendar.

Chipmaker Micron’s Earnings to More Than Double in Q2; Target Price $115

Micron Technology, one of the world’s leading semiconductor manufacturers, is expected to report its fiscal second-quarter earnings of $0.93 per share on Wednesday, representing year-over-year growth of more than 106% from $0.45 per share seen in the same quarter a year ago.

The semiconductor company is expected to post revenue growth of about 30% year-on-year to around $6.2 billion. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 10%.

Micron shares, which surged about 40% in 2020, traded 1.4% lower at $86.77 on Monday. But the stock rose over 15% so far this year.

Analyst Comments

“We expect this to be a good quarter, though enthusiasm over sharp increases in pc and server pricing should be tempered by smaller increases elsewhere, and potential supply constraints in the May quarter; still, we would expect our EPS to increase. Remain Overweight with $105 price target,” noted Joseph Moore, equity analyst at Morgan Stanley.

“We expect DRAM pricing to inflect in 2021 as inventories normalize and demand returns. We alter our price assumptions and now expect stronger pricing for both NAND and DRAM in the May quarter. We see demand growth on the back of seasonality, memory elasticity/higher content per unit, and low customer inventories, and very slow supply growth in DRAM given declines in capex. We continue to believe that memory stocks have a relatively well-defined earnings cycle, though highs and lows are likely to be better than they have been historically.”

Micron Stock Price Forecast

Twenty-six analysts who offered stock ratings for Micron in the last three months forecast the average price in 12 months of $115.59 with a high forecast of $150.00 and a low forecast of $90.00.

The average price target represents a 33.35% increase from the last price of $86.68. Of those 26 analysts, 23 rated “Buy”, three rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $105 with a high of $140 under a bull scenario and $40 under the worst-case scenario. The firm gave an “Overweight” rating on the semiconductor makers’ stock.

Several other analysts have also updated their stock outlook. Susquehanna raised the stock price forecast to $145 from $135. BMO upped the target price to $90 from $80. Citigroup lifted the price target to $130 from $116. UBS raised the price objective to $120 from $110. Needham upped the target price to $115 from $100.

Moreover, Rosenblatt Securities increased the target price to $150 from $120. JP Morgan lifted the price target to $130 from $100. Piper Sandler upped the stock price forecast to $90 from $80.

Check out FX Empire’s earnings calendar

The Three Pillars for Stocks

We’re officially almost through with the first quarter of 2021. While a broad correction did not happen by now, as I thought, the Nasdaq dipped into correction territory twice.

There might also be as much uncertainty for tech stocks today as there was at March’s start.

However, let’s look at the big picture almost a week after we hit the 1-year anniversary of the market’s bottom. Three pillars remain in motion as a strong backdrop for stocks:

  1. Vaccines
  2. Dovish monetary policy full of stimulus
  3. Financial aid

While the major indices are still positive for 2021, every month this year has been marked by hot starts, marred by mid-month uncertainty and downturns. We’re dealing with rising bond yields, inflation scares, volatile Reddit trades, and an improving yet slowing labor market recovery.

Plus, although earnings came in strong this past quarter, stock valuations are still at an overly inflated point not seen in years. In fact, Ray Dalio , founder of the world’s largest hedge fund, Bridgewater Associates, says there’s a bubble that’s ‘halfway’ to the magnitude of 1929 or 2000.

We could see some more volatility on tap this week as the market continues to figure itself out.

  1. Suez Canal- There’s been a gigantic tanker blocking arguably one of the most crucial waterways for global trade for the last 6 days. There are indications that the tanker may be on the way to being freed. But the sooner this happens, the better. The Suez Cana controls about 10% of global trade, so you can only imagine the hundreds of billions of dollars bleeding per day the more this drags on.
  2. Economic Data- Consumer Confidence, the March job’s report, the unemployment rate, and the PMI Manufacturing index will be released this week.
  3. Earnings- Chewy (CHWY) will report Tuesday (Mar. 30) after market close, and Walgreens Boots Alliance (WBA), Dave & Busters (PLAY), Micron (MU) will all report after market close Wednesday (Mar. 31).

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.

With that said, to sum it up:

Over a year after we bottomed, there is optimism but signs of concern.

The market has to figure itself out. More volatility is likely, and we could experience more muted gains than what we’ve known over the last year. Inflation and interest-rate worries should be the primary tailwind. However, a decline above ~20%, leading to a bear market, appears unlikely to happen any time soon.

Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck.

Russell 2000 – Time to Pounce?

Figure 1- iShares Russell 2000 ETF (IWM)

I kicked myself for not calling BUY on the Russell after seeing a minor downturn during the second half of February. I wasn’t going to make that mistake again.

After the iShares Russell 2000 ETF (IWM) went on its latest rally to start March, I checked out the chart. I noticed that almost every time it touched or minorly declined below its 50-day moving average, it reversed.

Excluding the recovery in April from last year’s crash, 5 out of the previous 6 times the Russell did this with its 50-day, it saw a sharp reversal. The only time it didn’t was in October 2020, when the distance between its 50-day and its 200-day moving average was a lot more narrow.

Fast forward to Tuesday (Mar. 23). The Russell 2000 saw its worst day since February 25, dropped below its 50-day, and I switched the call to a BUY.

Now, as we start the final week in March, we may be looking at the 6th reversal after dipping below its 50-day. The IWM has been up about 4.25% since March 24.

Aggressive stimulus, friendly policies, and a reopening world bode well for small-caps in 2021. I think this is something you have to consider for the Russell 2000 and maybe overpay for.

Based on the RSI and where we are in relation to the 50-day moving average, I still feel that this is a BUY.

For more of my thoughts on the market, such as tech, inflation fears, and why I love emerging market opportunities, sign up for my premium analysis today.

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For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Micron Stuck in Neutral Ahead of Earnings

Micron Technology Inc. (MU) reports Q2 2021 earnings after Wednesday’s U.S. opening bell, with analysts looking for a profit of $0.96 per-share on $5.6 billion in revenue. If met, earnings-per-share (EPS) will mark a 113% profit increase compared to the same quarter last year. The stock closed lower in January despite beating Q1 2021 top and bottom line estimates and raising Q2 guidance, but recovered quickly and continued the uptrend into early March.

Micron Ceases 3D XPoint Development

The memory giant raised Q2 profit and revenue guidance again on Mar. 3 but the news failed to attract fresh buying interest, yielding a trading range that violated the 50-day moving average for the first time since October 2020 last week. Semiconductor sentiment has deteriorated since news of a worldwide shortage hit the headlines, contributing to massively overbought technical readings generated by 2020’s outsized 52% return.

Micron shifted technical focus last week, adjusting its portfolio strategy to focus on Compute Express Link (CXL), the recently introduced standard for communication between computation, memory, and storage. The company is also ceasing the development of 3D XPoint, a non-volatile memory technology developed jointly with Intel Corp. (INTC) for use in solid state drives (SSDs). The technology has received a lukewarm reception despite high marks by reviewers.

Wall Street and Technical Outlook

Wall Street consensus stands at a ‘Buy’ rating based upon 28 ‘Buy’ and 6 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $80 to a Street-high $150 while the stock closed Friday’s session just $8 above the low target. This humble placement highlights deterioration in investor sentiment since 2020’s strong advance.

Micron topped out in the 60s in the first quarter of 2018, giving way to a broad consolidation, followed by a November 2020 breakout that ran out of steam at 95.75 on Mar. 1. Unfortunately, that print is less than two points under September 2000’s all-time high at 97.50, which marks major resistance despite the 21-year time span. Looking back, hundreds of tech stocks have spent months or years grinding against this historic barrier before breaking out.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Micron Nears Resistance Ahead of Earnings

Micron Technology Inc. (MU) ended 2020 at a 20-year high above 75, booking an impressive 40% annual return. It’s the first chip manufacturer to report earnings in January, with Q1 2021 results set for release after Thursday’s closing bell.  Wall Street analysts now expect the memory giant to book a profit of $0.67 per-share on $5.63 billion in revenue. If met, earnings-per-share (EPS) will mark a 39% profit increase, compared to the same quarter in 2020.

Buy The Pullback

The stock is still trading more than 20 points below the Internet bubble peak posted in the summer of 2000. The vast majority of chip stocks have cleared that formidable barrier, highlighting more than a decade of sub-par performance. However, it’s now engaged in a strong uptrend after mounting June 2018 resistance in the mid-60s and pullbacks should mark buying opportunities as the rally works through the last pockets of overhead supply.

Cowen analyst Karl Ackerman raised his target from $75 to $80 in December, noting, “we raised our estimates and expected a beat-and-raise following MU’s Technology Roadmap, but the company subsequently articulated an even stronger outlook than we expected. We’re raising our target to $80 as we true-up our model on higher numbers. Demand has improved, inventory days should recede, and limited capex investments (particularly in DRAM) should tighten supply and demand.”

Wall Street and Technical Outlook

Wall Street consensus brightened considerably in 2020, lifting to a ‘Strong Buy’ rating based upon 17 ‘Buy’, 1 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $35 to a Street-high $100 while the stock closed Friday’s session and 2020 about $4 below the median $79 target. This humble placement should support additional upside in the first quarter, especially if the company beats top and bottom line expectations this week.

Micron sold off after a multiyear uptrend stalled in the 60s in 2018, finding support in the upper 20s at year’s end. It rallied within a few points of the prior peak in February 2020 and collapsed with world markets, reversing just three points above the prior low in March. Buying interest then surged, generating a strong recovery wave that mounted resistance in November. Price action added another 10 points through December, setting the stage for a strong start to 2021.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Three Chip Stocks Hitting New Highs

PHLX Semiconductor Index has posted fabulous returns so far in 2020, lifting more 40% since the last trading day of 2019. Sadly, many well-known names topped out with broad benchmarks in September and are working off overbought technical conditions through trading ranges or lower prices. As an alternative, let’s look at a smaller group that’s hitting new highs as we wrap up the month of November, well-positioned for even higher prices between now into year’s end.

A number of 2020 sector leaders have taken market share from Intel Corp. (INTC), which has fallen from grace after a series of self-inflicted wounds. The Dow component has lost 21% so far this year, in stark contrast with the broad-based SOX index, piling up misfires and delays driven by weak management and poor execution. The old school behemoth has lost significant business to more nimble rivals and could descend into oblivion in 2021.

Micron Technology

Micron Technology Inc. (MU) makes memory chips. The stock has booked a respectable 19% return this year but the rally off the first quarter low tells an even more bullish tale, doubling in price and lifting into a critical test at May 2018’s high in the mid-60s. A breakout could presage outstanding 2021 upside because the advance will face little resistance into the all-time high in the 90s, posted at the height of the Internet bubble in 2000.

Applied Materials

Applied Materials Inc. (AMAT) makes semiconductor equipment for mainstream and leading-edge fabrication and is benefiting from the developing technology war with China.  The stock has risen 36% so far in 2020 and just completed a massive cup and handle breakout above the 2000 high in the mid-50s. In addition, it’s gained more than 40% since the end of October, capitulating on strong Q4 2020 top and bottom line results.

On Semiconductor

On Semiconductor Corp. (ON) makes chips for power generation, electric vehicles, cloud computing, and industrial production. It’s lesser known than other chip stocks in this review but has also benefited from Intel’s misfortunes, with accelerating sales surprising many analysts. The stock has just broken out above the March 2018 peak in the mid-20s and is trading at an all-time high. It’s also more than tripled in price off the March 2020 low at 8.17.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.