Micron Reports Earnings Beat But Guides Lower

Memory-chip maker Micron Technology, Inc. (Ticker Symbol: MUWealth Strength IndexAAPL is Extremely Up and trending Up) reported better than expected earnings and revenue after the closing bell on Thursday. Micron reported an earnings per share beat of .56 cents per share vs. Wall Street analysts’ expectations of .48 cents per share.  Additionally, the company reported a revenue beat of $4.87 billion vs. Wall Street analysts’ estimates of $4.52 billion.  Even though Micron beat analysts estimates it was their third quarter in a row of declining sales.

The Boise, Idaho-based company also updated its guidance for their next earnings release. The company now expects its earnings per share to come in at .46 cents per share and revenue to be at $5 billion which was around the midpoint of their previous guidance.  Wall Street analysts’ average estimates were for Micron to report earnings per share of .52 cents with $4.7 billion in revenue next quarter.  The stock was lower today on the news.

The chart above is a long-term weekly chart of Micron’s stock over roughly the past six years. The stock had a solid start to the year in 2014 and rallied over 60% throughout the whole year.  In the first quarter of 2015, the company released a lackluster earnings and guidance report, which would set the tone of negative trading for the next two years.  During that time Micron found price support around the $10 level and began to put in a massive inverse head and shoulders pattern. Traders and investors sometimes look at an inverse head and shoulder patterns for a possible pause within the current trend which can lead to a reversal, as occurred in Micron’s case.

Some traders use what’s called a “measured move” to try and project where the stock could possibly go in the future based on breakouts and measurements from technical formations.  In Micron’s case, one would take the bottom price from the head of the pattern (roughly $10) and the price of the neckline from the pattern (roughly $20) then subtract them to get the difference ($10). The difference is then projected from the neckline in the direction of the breakout to project the price of the measured move (Neckline – Difference = Measured Move). In Micron’s case, the projected price target from the inverse head and shoulders pattern was roughly $30.00, which the stock achieved six months after breaking out from that pattern. The stock continued to rally and topped out just above the $60.00 price level.  Micron proceeded to sell-off over the next year finding support twice near its 200-week moving average.  Currently, the stock is up over 25% for the year.

(Chart above courtesy of ​www.tipranks.com​)

Based on a survey of 16 analysts offering 12-month price targets, the average price target for Micron’s stock is $55.65. According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $43.93.

In May of this year, the United States banned US companies from doing business with Huawei, a Chinese manufacturer of communications equipment. Huawei did a fair amount of business with Micron and the ban threatens to hurt the companies financials, which is part of the reason Micron guided lower.

Investors in the company should look to Micron’s next earnings release on December 18th for fresh news within the company.

 


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