Chip Stock Facing Off With Key Trendlines

Micron will report earnings on September 28 after the close

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The last time we checked in with chipmaker Micron Technology, Inc. (NASDAQ:MU), the stock was sliding after a bear note. Now, a month later, MU is down 1.3% to trade at $73.40 today, but has filled that bear gap from mid-August. Now, with earnings two weeks away, it's time to revisit Micron's technical backdrop.

Micron has a mixed history of post-earnings reactions. The stock shed 5.7% after the company's quarterly report in July, but gapped higher by 4.8% back in April. Overall, MU averages a post-earnings move of 5.5%, regardless of direction, in the last eight quarters. 

MU is up 61% year-over-year, but is battling its year-to-date breakeven level. Several descending moving averages loom above the shares right now, while 16 of the 21 brokerages in coverage maintain "strong buy" ratings, with zero "sells" on the books. Moreover, Micron Technology stock offers a forward dividend of $0.10 and a dividend yield of 0.14%.

From a fundamental point of view, Micron Technology stock has an intriguing valuation. MU trades at a price-earnings ratio of 20.52, which isn’t bad for a tech company with a market cap of $83.7 billion. Micron stock also has an amazing forward price-earnings ratio of 7.00, signaling a considerable expected increase in earnings. However, Micron Technology hasn’t performed well in recent years, experiencing a 29% decrease in revenues and an 81% decline in net income between fiscal 2018 and fiscal 2020.

Nonetheless, Micron Technology has begun to show strong signs of an ongoing recovery, with its trailing 12-month revenues up 19% and its trailing 12-month net income increasing 54% compared to fiscal 2020. In addition, MU has a solid balance sheet with $8.35 billion in cash and $7.28 billion in total debt, facilitating the company's recovery and making Micron stock a potential value play ahead of earnings.


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