Analyst Serves Chip Stock Rare Downgrade

There has been an unusual put-skew among MU options traders

Managing Editor
Apr 8, 2019 at 10:36 AM
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Shares of Micron Technology, Inc. (NASDAQ:MU) are moving lower, last seen down 0.8% at $42.98, after Cowen and Company downgraded the stock to "market perform" from "outperform," and trimmed its price target to $45 from $46. Cowen said it expects Micron's profitability to decline in 2020, and predicted margin pressure for the rest of 2019.

Looking at the charts, Micron stock has added more than 50% since touching an annual low of $28.39 in late December. What's more, the equity recently topped its 200-day moving average for the first time since August, and this trendline could now switch roles to act as support.

Coming into today, analysts were leaning bullishly toward MU. Specifically, 16 of 26 covering firms sport "buy" or better ratings, and the stock's average 12-month price target of $46.52 represents 9% upside to current levels.

On the other hand, Micron Technology stock's Schaeffer’s put/call open interest ratio (SOIR) of 1.71 sits in the 88th percentile of its annual range. In other words, this lofty ratio suggests a bigger-than-usual put-skew among near-term options traders. 

Echoing that, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 0.98 is in the 82nd percentile of its annual range. This indicates that options buyers have picked up MU puts over calls at a faster-than-usual pace during the past two weeks.

 

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