Low Expectations Ahead Of Micron Technology EarningsThe memory chip giant will need to beat reduced estimates to get skeptical buyers off the sidelines.
Micron Technology Inc. (MU) reports Q4 2020 earnings after the U.S. closing bell on Tuesday, with Wall Street analysts expecting a profit of $0.94 per-share on $5.54 billion in revenue. The stock rose 4.8% after beating Q3 top and bottom line estimates on June 29th but industry headwinds then kicked into gear and the stock failed to break out of a 13-point trading range that’s now entered its 6th month.
Micron Technology Lowers Q4 Guidance
Micron sentiment soured in August when management told a KeyBank conference that Q4 earnings would be weaker than previously expected due to supply issues that continue to weigh on dynamic random access memory (DRAM) prices. Analysts lowered estimates after the disclosure but no one is sure about performance in the second half of the third quarter. That confusion came into play on Monday morning when Citigroup placed the stock on the ‘Negative Catalyst Watch’, expecting Tuesday’s metrics to be below reduced guidance.
However, not everyone is bearish on Micron’s outlook. Cleveland Research analyst Chandler Converse upgraded the stock from ‘Neutral’ to ‘Buy’ last week, noting his channel checks continue to “point to a turn in DRAM and NAND pricing in Q2”. He is looking for even higher prices in the first half of 2021 and believes Micron could “outperform consensus expectations in the second half” and head into a strong 2022, underpinned by more bullish supply and demand expectations.
Wall Street And Technical Outlook
Wall Street consensus is stronger than recent price action, maintaining a ‘Moderate Buy’ rating based upon 17 ‘Buy’, 5 ‘Hold’, and just 1 ‘Sell’ recommendation. Price targets currently range from a low of $35 to a street-high $100 while the stock is now trading about $14 below the median $63 target. This humble placement could generate a high percentage ‘buy-the-news’ reaction if Tuesday’s report exceeds expectations.
The stock is dead in the water technically-speaking, stuck in a 5-month trading range that reflects broad investor indecision. Price action has crisscrossed the 50- and 200-day moving averages multiple times during this period while the broad-based PHLX Semiconductor Index (SOX) has exhibited leadership, lifting into a series of new highs. Micron will need to surprise market watchers with upbeat results and forward guidance to shake off this laggard status.
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