Earnings Preview: Micron Technology, Inc. (MU)

Micron Technology, Inc. (MU) could be in trouble if the company's earnings report doesn't measure up to expectations

by Alex Eppstein

Published on Dec 21, 2015 at 2:56 PM
Updated on Jun 24, 2020 at 10:16 AM

There's not a whole lot in the way of economic or earnings data this week. However, one exception to this rule is chipmaker Micron Technology, Inc. (NASDAQ:MU), which will report fiscal first-quarter results tomorrow afternoon. Here's a closer look at expectations for the stock heading into the event.

Over the past eight quarters, MU has averaged a post-earnings single-session move of 7% in either direction. This time around, the options market is pricing in a slightly bigger swing of 7.5%, based on near-term at-the-money straddle data.

If options traders have their way, this move will resolve to the upside. Specifically, traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open nearly five MU calls for each put during the last 10 sessions. The corresponding call/put volume ratio of 4.73 outstrips 95% of comparable readings from the past year.

Echoing this, MU's Schaeffer's put/call open interest ratio (SOIR) checks in at 0.51, indicating calls roughly double puts among options with a shelf-life of three months or less. Furthermore, this SOIR ranks in the low 14th percentile of its annual range.

Optimism can be found outside of the options pits, too. For example, 64% of the analysts tracking MU have handed out a "buy" or better endorsement. Plus, the average 12-month price target of $20.78 sits 42.3% above the stock's current perch at $14.60.

From a contrarian perspective, Micron Technology, Inc. (NASDAQ:MU) isn't in the best spot. If earnings come up shy of estimates tomorrow night, an unwinding of bullish option positions and/or a round of downwardly revised analyst opinions could exacerbate selling pressure -- extending the security's 58% year-to-date loss.

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