3 Ways To Trade Micron Technology Before Chip Heavyweight Profits Report


  • Shares of Micron Technology, one of the most prominent chip names, rose nearly 14% in 2021.
  • Management will release the financial statements for the first quarter of Fiscal 22 on December 20.
  • Long-term investors might consider buying the MU stock declines, especially if they drop to $ 83 or below.

Investors in the memory chip maker Micronic Technology (NASDAQ 🙂 posted double-digit returns in 2021. So far this year, MU stock has returned nearly 14%. However, by comparison, the is up 41.8%.

On April 12, MU shares hit an all-time high just below $ 97. But since that peak, they have fallen more than 11.5%, trading at $ 85.66. The stock’s 52-week range was $ 65.67 to $ 96.96, and the market cap (cap) stands at nearly $ 96 billion.

In terms of global semiconductor revenue, Micron’s market share in 2020 was 4.7%. Meanwhile, according to recent measurements of the World Semiconductor Trade Statistics (WSTS), “The global semiconductor market is expected to grow 25.6% in 2021, to continue growing 8.8% in 2022.”

Micron’s exercise ends September 2. The chip heavyweight released fourth quarter numbers on September 28. It was $ 8.27 billion, up from $ 6.06 billion a year ago. Non-GAAP diluted earnings per share (EPS) of $ 2.42 was $ 1.08 in the fourth quarter of 2020.

Regarding the results, CEO Sanjay Mehrotra said:

“In fiscal 2021, we established DRAM and NAND technology leadership, generated record revenues in multiple markets, and launched a quarterly dividend. The demand outlook for 2022 is strong and Micron provides innovative solutions to our customers, fueling our long-term growth. “

According to its FY22 first quarter report on Monday, December 20, after the close, management expects revenue to be in the order of $ 7.65 billion ± $ 200 million. Diluted EPS is estimated at $ 2.10 ± $ 0.10.

Prior to the release of fourth quarter results, MU shares were trading at around $ 75. On October 12, the stock hit an intraday low of $ 65.67, the lowest level for stocks in a year.

However, the stock has rallied since then, closing at $ 85.66 on December 15.

What to expect from Micron Store

Among 36 analysts surveyed via Investing.com, the Micron Technology share has a outperform “.

UM consensus estimates

Chart: Investing.com

Analysts also have a 12-month median price target of $ 100.32 for the stock, which implies an increase of more than 17% from current levels. The 12 month price range is currently between $ 58.00 and $ 172.00.

Likewise, under a number of valuation models, such as those that could take into account P / E multiples or the 10-year discounted cash flow (DCF) growth output method, the average fair value of MU shares stood at $ 115.02, implying upside potential. by more than 34%.

In addition, we can look at the companys financial health determined by ranking it on more than 100 factors compared to its peers in the information technology sector. In terms of growth, cash flow and earnings health, Micron Technology scores 3 out of 5 (best score). Its overall performance is rated 4 (“excellent”).

The P / E, P / B and P / S ratios for MU stocks are 16.4x, 2.2x and 3.5x respectively. In comparison, these metrics for peers stand at 33.1x, 7.3x, and 8.3x.

Finally, readers looking at the technical charts might be interested to know that several MU stockss medium-term indicators warn investors and give signals of overbought. However, the long-term bullish sentiment is intact.

Given the recent price hike, our first expectation is short-term profit-taking on Micron Technology stock which could push it below $ 85. Then MU could trade a range, maybe between $ 80 and $ 85, and establish a new base. Thereafter, a new stage is likely to begin.

3 Possible transactions on Micron Technology shares

1. Buy MU stocks at current levels

Investors who are not concerned about daily price swings and believe in the long-term potential of the company might consider investing in shares of Micron Technology now.

On December 15, MU stock closed at $ 85.66. Investors who buy and hold should expect to hold this long position for several months, if not several quarters, while the stock attempts to target price of $ 100.32. Such a decision would lead to a return of more than 17% from the current level.

2. Buy an ETF with MU as a holding company

Readers who do not wish to commit all of the capital to shares of Micron Technology but still wish to have equity exposure might consider looking for a fund that owns the company as a holding company.

Examples of such ETFs are:

  • ETF Invesco PHLX Semiconductors (NASDAQ :): The fund is up 23.9% since its inception in June, and MU stockthe weighting s is 4.07%;
  • First Trust Nasdaq Semiconductor ETF (NASDAQ :): this fund is up 33.3% year-to-date, and MU stockthe weighting s is 4.03%;
  • IShares MSCI USA Value Factor ETF (NYSE :): Fund is up 21.8% year-to-date, and MU stockthe weighting s is 3.70%;
  • Frontier Tech Wolf Innovative ETF (NYSE :): Fund is up 6.7% year-to-date, and MU stockThe weighting is 3.06%.

3. Sale of secure cash put options

Investors who believe MU stock could continue to hit new highs in the coming weeks might consider selling a guaranteed cash put on Micron Technology stock – we cover regularly. As these are options, this arrangement will not suit all investors.

Suppose an investor wants to buy shares of Micron Technology, but does not want to pay the full price of $ 85.66 per share. Instead, the investor would prefer to buy the shares at a discount over the next few months.

One possibility would be to wait until the stock of MU goes down, which may or may not be the case. The other option is to sell a cash collateralized Micron Technology put option contract.

So the trader would typically write an on-the-money (ATM) or out-of-the-money (OTM) put option and simultaneously set aside enough money to buy 100 shares of the stock.

Suppose the trader places this trade until the option expiration date of February 18, 2022. Since the stock costs $ 85.66, an OTM put option would have an exercise price of $ 82.50. .

Thus, the seller would have to buy 100 MU shares at the strike price of $ 82.50 if the option buyer exercised the option to transfer it to the seller.

The 82.50 MU strikes put option on February 18, 2022 is currently offered at a price (or premium) of $ 4.60.

An options buyer would pay $ 4.60 X 100, or $ 460, as a bonus to the options seller. This premium amount is up to the seller of the option, regardless of what happens in the future. The put option will stop trading on Friday, February 18.

The maximum seller gain is this premium amount if the MU stock closes above the strike price of $ 82.50. If this happens, the option expires worthless.

If the put option is in the money (meaning the market price of the Micron Technology stock is lower than the strike price of $ 82.50) at any time before or at expiration on February 18 , this put option can be assigned. The seller would then be obligated to buy 100 MU shares at the put option strike price of $ 82.50 (ie for a total of $ 8,250).

The breakeven point for our example is the strike price ($ 82.50) minus the option premium received ($ 4.60), which is $ 77.90. This is the price at which the seller would start to suffer a loss.

Selling cash-secure put options is a moderately more conservative strategy than buying a company’s stock at the current market price. This may be a way to capitalize on any volatility in Micron Technology’s shares in the coming weeks, particularly around the date of earnings.

Investors who end up owning MU shares as a result of the writing of put options might further consider setting up to increase the potential returns of their shares. Thus, the writing of guaranteed cash put options could be considered the first step in share ownership.

About Troy McMiller

Check Also

Raine Capital LLC buys 1, sells

Raine Capital LLC recently filed its 13F report for the first quarter of 2022, which …