Micron Stock Seems Ripe for a Short Squeeze; Cirrus Logic Downgraded

Cirrus Logic shares fell to an annual low earlier today

Managing Editor
Feb 6, 2018 at 11:08 AM
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Chip stocks, Micron Technology, Inc. (NASDAQ:MU) and Cirrus Logic, Inc. (NASDAQ:CRUS) were the target of a flurry of analyst attention this morning, after the Apple suppliers each gave earnings updates. Below, we'll take a closer look at the brokerage notes, and how MU and CRUS stocks are reacting.

Micron Stock Upgraded After Guidance

Ahead of its March 22 earnings report, Micron Technology raised its second-quarter guidance, and appointed David Zinsner to chief financial officer. As a result, MU stock was upgraded to "overweight" at KeyBanc and to "strong buy" at Needham, with the latter waxing optimistic on long-term trends and the stock's valuation. Micron also saw its price target hiked at Stifel (to $85) and FBN Securities(to $60), though Morgan Stanley trimmed its price target to $54. 

Against this backdrop, Micron stock is up 5% to trade at $41.38. The shares have added an impressive 70% year-over-year, and the security's recent pullback after Apple cut its first-quarter iPhone X production target was quickly contained by familiar support at its 120-day moving average.

What's impressive is MU's ability to rally in the face of steady selling pressure, with short interest up 58% since early May. The stock could get a bigger boost, should some of the weaker bearish hands start to capitulate to its uptrend.

Cirrus Logic Stock Sinks After Earnings

At last check, Cirrus Logic stock is down 3.7% to trade at $43.24, and earlier fell to an annual low of $39.51, after the integrated circuit specialist reported fiscal third-quarter earnings and revenue below analyst expectations. The disappointing results were attributed to weak smartphone sales.

In reaction, Needham downgraded the Apple supplier to "hold" from "buy" this morning. No fewer than six other brokerages also chimed in with price-target cuts, including one to $36 from $45 at Barclays -- which said Cirrus Logic is "the clearest short in the Apple supply chain."

CRUS stock is now staring at a 19% one-month deficit, and there's plenty of room for more analysts to lower their outlooks. Heading into today's trading, half of the brokerages covering Cirrus Logic shares maintained a "buy" or better rating, while the average 12-month price target of $57.50 sits well above current trading levels.


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