Micron Technology Stock Slides on Morgan Stanley Bear Note

The firm predicted headwinds for the memory chip sector

Digital Content Manager
Aug 12, 2021 at 11:02 AM
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The shares of Micron Technology, Inc. (NASDAQ:MU) are down 7.6% at $69.36 this morning, after the memory chip maker received a downgrade from Morgan Stanley to "equal-weight," as well as a price-target cut to $75 from $105. The analyst in coverage signaled "winter is coming" for the sector, due to a "challenging backdrop for forward returns."

The brokerage bunch was optimistic towards the equity coming into today. Of the 20 analysts in question, 16 carried a "buy" or better rating, while the remaining four said "hold." Plus, the 12-month consensus target price of $116.68 is a 67.9% premium to current levels, indicating Micron Technology stock could see additional downgrades and/or price-target cuts in the near future.

The 100-day moving average has been an area of resistance on the charts since April, rejecting the equity's latest rally to the $83 mark. And while the $69 level looks ready to contain today's pullback, which has shares trading at their lowest level since December, the stock is still pacing for its fourth-straight daily drop. Year-over-year, Micron stock remains up 42.9%.

The options pits are firmly in the bearish camp. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), MU's 10-day put/call volume ratio sits higher than 82% of readings from the past 12 months. This means puts are getting picked up at a faster-than-usual clip.

Drilling down to today's options activity, 148.000 calls and 124,000 puts have crossed the tape so far, which is five times what is typically seen at this point. Most popular is the 8/27 65-strike put, where new positions are being opened, followed by the September 70 put.

These options traders are in luck, as MU premiums can be had for a bargain right now. This is per the equity's Schaeffer’s Volatility Index (SVI) of 32%, which sits higher than just 7% of readings from the past year, indicating options traders are pricing in low volatility expectations at the moment. 

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