Chipmaker Looking to Keep Earnings Beat Streak Alive

MU has a muted history of post-earnings reactions

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Semiconductor heavyweight Micron Technology, Inc. (NASDAQ:MU) received some bullish analyst attention earlier in the week. As the book on 2020, its time to look ahead to 2021, as the chipmaker will be one of the first companies to step into the earnings confessional.

Micron reports quarterly earnings after the market closes on Jan. 7. MU has outperformed earnings expectations on every single quarterly earnings report released in 2020. However, it only led to two post-earnings pops of 5.4% and 4.8% back in March and June, respectively. In the last eight quarters, MU has turned in a post-earnings move of 7.8%, regardless of direction. For next Thursday's report, the options market is pricing in a slightly smaller 7.2% move from the chipmaker.

From a fundamental perspective, Micron stock’s positives and negatives are very apparent. Micron has an excellent balance sheet. The company’s total equity stands at a massive $39 billion. In addition, Micron Technology holds $8.14 billion in cash and $7.23 billion in total debt.

MU Stock Chart

However, the company’s income statement paints a much less stable picture. Both Micron's annual revenue  and net income have declined since 2018. Over the past 12 months, Micron Technology generated just about $20 billion in revenue, which is $10 billion less than the company produced in 2018. Looking at the bottom line, Micron Technology's net income has been reduced by a jaw-dropping $12 billion since 2018. Micron Technology has produced just over $2.2 billion in net profits over the last 12 months.

Micron stock remains in the running as an interesting play for investors, despite its inconsistent sales and net profits. Micron stock has a forward price-earnings ratio of 18.83, which is extremely low for a company with a market cap of $78 billion. Overall, Micron Technology is still producing decent figures and remains a big player in its industry up against big names like Nvidia (NVDA) and Advanced Micro Devices (AMD).

For those interested in buying short-term options contracts, now could be the time to strike even with a volatile event such as earnings looming. That's because MU's Schaeffer's Volatility Index (SVI) currently stands at 57%, putting it in just the 24th annual percentile. In other words, volatility expectations appear muted at the moment.


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