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.
MU sees its Stochastic Oscillator ascending out of oversold territory
On December 04, 2024, the Stochastic Oscillator for MU moved out of oversold territory and this could be a bullish sign for the stock. Traders may want to buy the stock or buy call options. Tickeron's A.I.dvisor looked at 57 instances where the indicator left the oversold zone. In of the 57 cases the stock moved higher in the following days. This puts the odds of a move higher at over .
Technical Analysis (Indicators)
Bullish Trend Analysis
The Moving Average Convergence Divergence (MACD) for MU just turned positive on December 04, 2024. Looking at past instances where MU's MACD turned positive, the stock continued to rise in of 45 cases over the following month. The odds of a continued upward trend are .
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where MU advanced for three days, in of 321 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.
Bearish Trend Analysis
The Momentum Indicator moved below the 0 level on December 06, 2024. You may want to consider selling the stock, shorting the stock, or exploring put options on MU as a result. In of 96 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .
MU moved below its 50-day moving average on November 26, 2024 date and that indicates a change from an upward trend to a downward trend.
The 10-day moving average for MU crossed bearishly below the 50-day moving average on November 21, 2024. This indicates that the trend has shifted lower and could be considered a sell signal. In of 15 past instances when the 10-day crossed below the 50-day, the stock continued to move higher over the following month. The odds of a continued downward trend are .
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 .
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating well-balanced risk and returns. The average Profit vs. Risk Rating rating for the industry is 69, placing this stock slightly better than average.
The Tickeron Seasonality Score of (best 1 - 100 worst) indicates that the company is fair valued in the industry. The Tickeron Seasonality score describes the variance of predictable price changes around the same period every calendar year. These changes can be tied to a specific month, quarter, holiday or vacation period, as well as a meteorological or growing season.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating steady 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 PE Growth Rating for this company is (best 1 - 100 worst), pointing to worse than average 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 Valuation Rating of (best 1 - 100 worst) indicates that the company is slightly overvalued 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 (2.490) is normal, around the industry mean (9.168). P/E Ratio (144.100) is within average values for comparable stocks, (58.695). Projected Growth (PEG Ratio) (0.161) is also within normal values, averaging (3.095). Dividend Yield (0.005) settles around the average of (0.021) among similar stocks. P/S Ratio (4.490) is also within normal values, averaging (45.382).
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
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