Micron Technology Faces Resistance as It Gets Ready to Report Earnings
Over the last few years, Micron Technology (MU) has seen its stock struggle compared to the overall market. It has also struggled compared to its peers in the semiconductor industry. The stock peaked just below $65 back in June 2018 and then proceeded to fall by over 50% and drop below the $30 level. The stock did rally in 2019 and got back above the $60 level in early 2020. The market selloff in the first quarter of this year caused the stock to drop back down below $32.50. The stock has rebounded from the March low, but it could be facing some resistance from a downward sloped trend line that connects the highs from this year.
If we look at the Philadelphia Semiconductor Index over the same time period, it has performed much better. The index fell in the selloff that occurred in the fourth quarter of 2018 and it dropped pretty sharply in the first quarter of this year. If we go back to June ’18, the index has increased by approximately 5o% while Micron has dropped by 20%.
Micron is getting set to release fiscal fourth quarter earnings results on September 29, and analysts expect the company to earn $0.99 per share for the quarter. That is a 20.7% increase over the $0.82 the company earned in the third quarter. It is a 76.8% increase from the $0.56 per share the company earned in Q4 2019.
Revenue is expected to come in at $5.9 billion for the quarter and that is a jump of 8.5% over the third quarter. The revenue expectation is up 21.2% from the $4.87 billion in Q4 of 2019.
If we look at Tickeron’s screener for Micron, we see that the artificial intelligence platform has the stock rated as a buy. But there are mixed signals from the fundamental indicators, the technical indicators, and the A.I. Predictions.
On the fundamental side, the company gets positive readings from its Outlook Rating, Profit vs. Risk Rating, and the P/E Growth Rating. It gets a negative reading from its SMR Rating with neutral readings from the Valuation Rating and Price Growth Rating.
On the technical side, the stock gets bullish signals from the AROON indicator, MACD, Momentum, and Moving Averages. Those positive signals are offset by bearish signals from the Stochastics, RSI, and Bollinger Bands.
I have written about Micron on another site on several occasions over the last couple of years. The first article I wrote about the company was an earnings preview in June 2018. I wouldn’t say the article was bearish, but more of a cautious article as I felt the sentiment was extremely bullish at the time. You should have seen the comments I got from readers after that article was published. Readers were telling me I was crazy and that I didn’t know what I was talking about. Those were the nicer ones. I guess I got the last word on that when the stock dropped over 50% in the next six months.
Here we are two years later, and the sentiment is still skewed to the bullish side, but it isn’t nearly as extreme as it was back then. In June ’18, there were 30 analysts following the stock with 27 “buy” ratings and three “hold” ratings. Currently we have 34 analysts following the stock with 26 “buy” ratings, seven “hold” ratings, and one “sell” rating. If we look at the ratings in terms of the buys as a percentage of the total, the buy percentage in 2018 was 90%. Now the ratio is 78.8%.
The short interest ratio in 2018 was 1.14 which is really low, but it has increased to 1.84 now. That is still lower than the average short interest ratio, but not nearly as bullishly skewed as it was.
Given all of the information—the fundamentals, the technical analysis, and the sentiment indicators, I think the outlook for Micron is a muddled one. The stock faces resistance from the trend line I pointed out on its chart and the sentiment is still a little more bullish than it should be. The fundamentals are good, but not as good as they once were.
Momentum Indicator for MU turns negative, indicating new downward trend
MU saw its Momentum Indicator move below the 0 level on April 15, 2024. This is an indication that the stock could be shifting in to a new downward move. Traders may want to consider selling the stock or exploring put options. Tickeron's A.I.dvisor looked at 97 similar instances where the indicator turned negative. In of the 97 cases, the stock moved further down in the following days. The odds of a decline are at .
Technical Analysis (Indicators)
Bearish Trend Analysis
The 10-day RSI Indicator for MU moved out of overbought territory on April 12, 2024. This could be a bearish sign for the stock. Traders may want to consider selling the stock or buying put options. Tickeron's A.I.dvisor looked at 41 similar instances where the indicator moved out of overbought territory. In of the 41 cases, the stock moved lower in the following days. This puts the odds of a move lower at .
The Moving Average Convergence Divergence Histogram (MACD) for MU turned negative on April 12, 2024. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 47 similar instances when the indicator turned negative. In of the 47 cases the stock turned lower in the days that followed. This puts the odds of success at .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where MU declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
Bullish Trend Analysis
The Stochastic Oscillator demonstrated that the ticker has stayed in the oversold zone for 1 day, which means it's wise to expect a price bounce in the near future.
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where MU advanced for three days, in of 312 cases, the price rose further within the following month. The odds of a continued upward trend are .
MU may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.
The Aroon Indicator entered an Uptrend today. In of 244 cases where MU Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .
Fundamental Analysis (Ratings)
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to outstanding earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating outstanding price growth. MU’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating low risk on high returns. The average Profit vs. Risk Rating rating for the industry is 62, placing this stock better than average.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is fair valued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (2.825) is normal, around the industry mean (6.420). P/E Ratio (0.000) is within average values for comparable stocks, (115.554). MU's Projected Growth (PEG Ratio) (0.000) is slightly lower than the industry average of (2.540). Dividend Yield (0.004) settles around the average of (0.021) among similar stocks. P/S Ratio (6.711) is also within normal values, averaging (34.446).
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating weak sales and an unprofitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
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General Information
a manufacturer of advanced semiconductor solutions such as DRAMs, NAND flash memory, CMOS image sensors, other semiconductor components and memory modules
Industry Semiconductors