Micron Stock Eyeing New Lows After Cautious Outlook

Analysts have piled on with bear notes today as a result

by Patrick Martin

Published on Dec 19, 2018 at 9:18 AM
Updated on Dec 19, 2018 at 9:18 AM

The shares of Micron Technology, Inc. (NASDAQ:MU) are down 8.5% in electronic trading after the chipmaker's quarterly report. Micron revealed weaker-than-expected sales for its fiscal first-quarter, but more importantly gave a cautious outlook for 2019, with CEO Sanjay Mehrotra citing weak industry trends.

In response, Needham and RBC downgraded the chipmaker to "hold" and "sector perform," respectively. No fewer than seven other brokerages issued price-target cuts as well, including to $32 from $38 at BMO. Morgan Stanley in its bearish note said that Micron earnings are a sign of more weakness ahead.

On the charts, Micron stock is set to open at a new annual low, likely breaching its Dec. 17 bottom of $33.60. More specifically, it's shaping up to be MU's worst day since Sept. 6. But even prior to today's collapse, the shares had been digging out a channel of lower lows, with breakouts contained by their 40-day moving average, a trendline with bearish implications.

Despite the stock's struggles in 2018, analyst sentiment remains strong. Of the 24 brokerages covering MU, more than half rate it a "buy" or "strong buy," with only one "sell" on the books. Further, the security's consensus 12-month price target of $51.39 is a 50% premium to yesterday's closing perch of $34.11, suggesting today's onslaught of bear notes could be far from the last. 

In addition, there is ample room for more short sellers to come aboard the struggling chip name. The 48.28 million shares sold short is the lowest amount since September 2017, and represents a meager 4.4% of MU's total available float, or only 1.8  times the average daily trading volume. 

In the options pits, speculative players have been buying to open puts relative to calls at a quicker-than-usual clip. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the 10-day put/call volume ratio of 0.82 ranks 5 percentage points from an annual high. Echoing this, Micron's Schaeffer's put/call open interest ratio (SOIR) of 0.82 sits in the 80th percentile of its annual range, indicating that near-term traders have rarely been less call biased in the past 12 months. 

 

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