Micron Correction Slowly Coming to an End

Micron Technology Inc. (MU) reports Q4 2021 earnings after Tuesday’s closing bell, with analysts looking for a profit of $2.34 per-share on $8.21 billion in revenue. If met, earnings-per-share (EPS) will more than double the profit posted in the same quarter last year. The stock sold off 5.7% after beating Q3 estimates and raising Q4 EPS guidance in late June and fell another 14% into August before bouncing a few points into this week. It’s booked a negative 1% 2021 return-to-date after gaining nearly 40% last year.

Headwinds Could Persist into 2022

The company has been plagued by supply disruptions, like other semiconductor manufacturers, compounded by weakness in DRAM memory pricing. Well-known hedge funds have taken notice during the quarter, reducing or closing positions at funds run by George Soros, Stanley Druckenmiller, and David Tepper. Worse yet, Micron continues to underperform other chip stocks by a country mile, dropping 14% in the last three months while PHLX Semiconductor Index hit an all-time high less than two weeks ago.

Susquehanna analyst Mehdi Hosseini sounded upbeat last week, despite lowering the firm’s target from $150 to $135, noting “Although recent checks suggest a flattening in blended DRAM/NAND ASPs into YE21 and early 2022, we have decided to reduce estimates to reflect a worst case scenario of down low single digit in Nov-Q and down mid-single digit in Feb-Q. Nonetheless, with stock trading at ~6x our updated CY22 PE and actually down YTD, we argue that worst case scenario is already dialed into the share price”.

Wall Street and Technical Outlook

Wall Street consensus has missed the mark, with a ‘Buy’ rating based upon 27 ‘Buy’, 1 ‘Overweight’, and 4 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $75 to a Street-high $165 while the stock is set to open Monday’s session more than a point below the low target. Worse yet, this target has acted as an impenetrable price ceiling for the last seven weeks.

Micron Technology stalled less than a point below 2000’s all-time high at 97.50 in April and entered a steep correction that pierced the 200-day moving average in the 70s in August. The stock has traded below that barrier since that time but signs of accumulation should limit downside in coming weeks, regardless of this week‘s metrics. In addition, a monthly Stochastics sell cycle is finally approaching the oversold level, predicting fourth quarter bottoming action.

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.