Micron Stock Price Targets Boosted Before Earnings

The stock could struggle following the most recent Fed rate cut

Deputy Editor
Sep 25, 2019 at 12:10 PM
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Chip name Micron Technology, Inc. (NASDAQ:MU) is higher on two new price-target hikes from analysts. Specifically, BMO lifted its price target to $60 from $50, while Cowen boosted its estimate to $46 from $38. These two bull notes come just one day before MU's fiscal fourth-quarter earnings report, due out after the close tomorrow, Sept. 26. 

This puts the consensus Micron 12-month target price at $51.59 -- which sits just atop the stock's Sept. 11 one-year high of $51.39, and represents a 7% premium to MU's current perch at $49.22, up 1.5% on the day. Meanwhile, 14 brokerages in coverage call the equity a "buy" or better, and 10 say it's a "hold" or worse.

It's no surprise that most analysts are optimistic ahead of MU's quarterly reveal. The semiconductor name tends to do quite well the day after earnings. In fact, only three of its last eight post-earnings moves were negative, and the equity managed a 13.3% next-day pop on in June. This time around, the options market is pricing in an 11.4% swing for Friday's trading, regardless of direction, much wider than the 6.9% move the equity has averaged over the past two years. 

While MU tends to pop the day after earnings, investors might want to look out a little further. Data from Schaeffer's Senior Quantitative Analyst Rocky White shows the equity is one of the worst stocks to own after the Fed cuts rates twice in 60 days -- which just occurred last week. Looking at data from 1984, MU finished the higher one month later after only 33% of previous signals, averaging an underwhelming one-month gain of 1.04%. 

Drilling down, the options pits have seen an uptick in bearish activity today, with 47,000 puts across the tape -- two times the intraday average -- compared to 25,000 calls. A massive portion of these contracts have changed hands at the October 43 put, where positions are possibly being bought to open. This means traders are expecting a big swing lower through expiration at the close on Friday, Oct. 18. 


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