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Dec 11, 2020

Micron Technology in Overbought Territory Heading in to Earnings

In addition to writing for Tickeron, I also write independently at Seeking Alpha (SA). In June 2018, I made a concerted effort to increase my article submissions at SA and one of the first articles I wrote back then was an earnings preview on Micron Technology (MU). In that article I urged readers to take a cautious stance on the stock due to how bullish investors appeared to be at the time. I liked the fundamentals on the stock, but the stock had rallied sharply and the sentiment indicators were concerning.

Two and a half years ago, earnings and sales growth were the highlights of the fundamental picture. The return on equity and profit margin were also really good. Again, the fundamental picture wasn’t the problem. We see on the chart below that the stock had doubled in less than a year. The blue arrow shows when my article was published. You can see how the 10-week RSI and the weekly stochastic indicators were right at the edge of overbought territory. Look where they are now—they’re even higher and they just made a turn lower.

As I mentioned earlier, the sentiment indicators were also a problem. There were 30 analysts covering the stock back then and 27 of the 30 had the stock rated as a “buy”. The other three had the stock rated as a “hold”. Now there are 35 analysts covering the stock with 28 “buy” ratings, five “hold” ratings, and two “sell” ratings. This means the buy percentage fell from 90% to 80%. The buy percentage is still higher than the average stock, but has come down some.

The short interest ratio was low at 1.14 in June ’18 and it’s at 1.92 currently. The indicator is still more bullish than the average stock, but like the analysts ratings, it’s not as bullish as it used to be.

Another factor in why I was urging investors to be cautious was a big jump in the earnings estimates ahead of the report. In the 30 days leading up to the report, the consensus EPS estimate jumped from $2.85 to $3.12. The company itself had issued statements, adjusting its guidance and analysts adjusted too. Looking at today’s consensus EPS estimate, it’s at $0.71 and it was at $0.47 just 30 days ago.

The situation is starting to look very similar to what we saw in 2018. The stock has more than doubled in the last eight months and it’s in overbought territory. The sentiment indicators suggest that the stock is getting a lot of love from analysts and short sellers, and the consensus estimate has jumped significantly in the last 30 days. However, the fundamentals aren’t as good as they used to be.

The earnings and sales growth are still decent, but they aren’t nearly as good as they were two and a half years ago. The ROE is below average now and the profit margin is in the average range.

The changes in the fundamentals and the overbought status helps explain why Tickeron’s scorecard has Micron Technology rated as a “sell” right now.

 

Related Ticker: MU

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 .

Price Prediction Chart

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 shows that the ticker has stayed in the oversold zone for 4 days. The price of this ticker is presumed to bounce back soon, since the longer the ticker stays in the oversold zone, the more promptly an upward trend is expected.

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)

Fear & Greed

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 63, 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 (2.755) is normal, around the industry mean (6.370). P/E Ratio (0.000) is within average values for comparable stocks, (109.575). MU's Projected Growth (PEG Ratio) (0.000) is slightly lower than the industry average of (2.498). Dividend Yield (0.004) settles around the average of (0.021) among similar stocks. P/S Ratio (6.549) is also within normal values, averaging (36.504).

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.

Notable companies

The most notable companies in this group are NVIDIA Corp (NASDAQ:NVDA), Taiwan Semiconductor Manufacturing Company Ltd (NYSE:TSM), Broadcom (NASDAQ:AVGO), Advanced Micro Devices (NASDAQ:AMD), QUALCOMM (NASDAQ:QCOM), Applied Materials (NASDAQ:AMAT), Texas Instruments (NASDAQ:TXN), Intel Corp (NASDAQ:INTC), Lam Research Corp (NASDAQ:LRCX), Micron Technology (NASDAQ:MU).

Industry description

The semiconductor industry manufacturers all chip-related products, including research and development. These chips are used in innumerable electronic devices, including computers, cell phones, smartphones, and GPSs. Intel Corporation, NVIDIA Corp., and Broadcomm are some of the prominent players in this industry. Semiconductor companies usually tend to do well during periods of healthy economic growth, thereby inducing further research and development in the industry – which in turn augurs well for productivity and growth in the economy. In the near future, demand for semiconductor products (and possibly innovation within the segment) should only expand further, with the proliferation of 5G, autonomous vehicles, IoT, and various AI-driven electronics set to herald a new, advanced chapter in the technology-driven world as we know it. With burgeoning prospects comes great competition. In 2015, SIA estimated that U.S. semiconductor industry ranks as the second most competitive U.S. industry out of 2882 U.S. industries designated manufacturers by the U.S. Census Bureau.

Market Cap

The average market capitalization across the Semiconductors Industry is 38.55B. The market cap for tickers in the group ranges from 13.43K to 1.99T. NVDA holds the highest valuation in this group at 1.99T. The lowest valued company is CYBL at 13.43K.

High and low price notable news

The average weekly price growth across all stocks in the Semiconductors Industry was -4%. For the same Industry, the average monthly price growth was -11%, and the average quarterly price growth was 35%. WISA experienced the highest price growth at 147%, while AWEVF experienced the biggest fall at -34%.

Volume

The average weekly volume growth across all stocks in the Semiconductors Industry was 11%. For the same stocks of the Industry, the average monthly volume growth was 18% and the average quarterly volume growth was 12%

Fundamental Analysis Ratings

The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows

Valuation Rating: 57
P/E Growth Rating: 47
Price Growth Rating: 59
SMR Rating: 69
Profit Risk Rating: 63
Seasonality Score: -17 (-100 ... +100)
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MUDaily Signal changed days agoGain/Loss if shorted
 
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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

Profile
Fundamentals
Details
Industry
Semiconductors
Address
8000 South Federal Way
Phone
+1 208 368-4000
Employees
43000
Web
https://www.micron.com
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