Micron Q3 preview: Where next for MU stock?

When will Micron release Q3 earnings?

Memory and data storage chipmaker Micron will release third quarter earnings covering the three months to early June on Thursday June 30.

Micron Q3 earnings consensus

Wall Street forecasts Micron will report a 16.5% year-on-year rise in sales in the third quarter to $8.65 billion and adjusted EPS is expected to grow over 30% to $2.44.

Micron Q3 earnings preview

Micron has set the bar high after vowing to deliver record revenue and ‘robust profitability’ this year, representing a rare buoyant tone in the current climate as rampant inflation and a weaker growth outlook hurts the prospects for most stocks this year.

One of the reasons Micron is managing to grow earnings at a faster rate than revenue is the fact profitability has been on the rise as it shifts more to catering to data centres and industrial applications and analysts think the company’s gross margin could hit 48% in the quarter. Still, lower-margin sales to the smartphone and computer markets still accounts for over half of all revenue and any softness here amid the cost-of-living crisis could be significant.

Plus, numerous analysts have flagged prices of both DRAM (which are primarily used for temporary storage on computers, servers, and mobile devices) and NAND chips (which provide permanent storage) could come under pressure in the second half of the financial year, partly because customers have sizeable inventories of memory chips as they wait for supply constraints impacting other key components to ease. This means demand and pricing are both partially reliant on how the shortage in other chips and components pans out going forward.

With that in mind, the outlook for the fourth quarter will set the tone for how it will end the financial year and could prove influential in how markets react to the update. Notably, Micron beat its own guidance in the last quarter. Wall Street has currently pencilled-in an 11.9% rise in revenue in the final three months of the financial year to $9.26 billion and 10.2% growth in adjusted EPS to $2.67.

Assuming Micron meets expectations, that puts the company on course to report a 20.6% rise in annual revenue this year and a 56% jump in adjusted earnings, which would be all the more impressive considering EPS more than doubled last year. However, it is worth noting that Wall Street has become more cautious by lowering its expectations on Micron in recent months.

Where next for MU stock?

Micron shares have been caught up in the broader selloff to hit stock markets in 2022, having plunged by almost 40% since peaking at all-time highs back in January.

The downtrend accelerated earlier this month and pushed the stock to a 19-month closing low of $55. This should be regarded as the initial floor considering it is in-line with a key level of resistance two years ago, supported by the fact this caused the RSI to slip into oversold territory to suggest this is low enough to attract buyers back into the market. However, there has been a notable dip in the average volume at time over the past five days, which casts some doubt that the recent rise can gain momentum. The drop could be fairly swift should this floor fail to hold as this opens the door to the next two downside targets of $49.30 and $44.50.

Although the stock looks to have reversed course, it still has a long way to go to install confidence that it has broken out of the downtrend that has been in play since February. It needs to first recover back above the 2021-low at $66 and recapture the 50-day moving average to signal that it can find higher ground. That would allow it to target the 100-day moving average at $74.50 and the 200-day moving average at $77. Notably, the 37 brokers that cover the stock remain bullish with an average target price of $98, implying the stock can rise by over two-thirds from current levels and once again test the all-time highs seen in January.

How to trade Micron stock

You can trade Micron shares with City Index in just four easy steps:

Open a City Index account, or log-in if you’re already a customer.
Search for ‘Micron’ in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

Or you can try out your trading strategy risk-free by signing up for our Demo Trading Account.

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.