Micron (MU) Earnings Could Be Driven By Increased DRAM Demand

$Micron Technology(MU)$ is expected to release earnings on 18 Dec2024 after the market closes (AMC).

MU last reported earnings on 25 Sep 2024 after the market close (AMC). MU shares gained +14.7% the day following the earnings announcement to close at 109.76. Following its earnings release, 82 days ago, MU stock has drifted -1.4% lower.

From the time it announced earnings, MU traded in a range between 95.53 and 114.30. The last price (108.26) is closer to the higher end of range.

Micron is expected to deliver $8.71 billion in revenue and $1.76 in adjusted earnings per share (EPS) on Wednesday. But as investors we should also look out for the company forward guidance and outlook for 2025.

Demand For DRAM In PC and Handset Might Set To Increase Favoring Micron

Though Micron's stock surged earlier this year, it has sold off since July, amid skepticism over the non-artificial intelligence (AI) portions of the semiconductor sector.

Micron recent stock surge came back despite softness in the PC and smartphone markets, there might be demand for more DRAM as mobile makers are integrating AI into their phone, this might require additional DRAM to power the handset, similar trend could be seen on the PC side.

Though there is excess DRAM inventory in the PC and handset end markets (combined 50% of [fiscal 2024] sales) highlighted by one top analyst, these inventory should be able to be deployed and Micron earnings could be offset by strength from the data center end market (35% of F24 sales).

Micron high-bandwidth DRAM memory products for artificial intelligence are seeing a surge in demand, especially when AI inference have been rolled out to consumers.

One of my recent shopping for mobile phones, have seen mid to high end phones having AI built into it, and the AI can performed pretty well.

The surge in $Broadcom(AVGO)$ together with Micron have helped to push S&P 500 Technology sector to be in the green.

Micron (MU) More Than 25% Year-To-Date Returns

Micron investors have enjoyed more than 25% of returns year-to-date, in 2024, this could be due to the strength of the semiconductor sector after August correction.

There have been quite a huge decline from July to August 2024, before it start to pick up again, but Micron is still a bit far from its highs of 150s around June-July.

Option IV Skew Indicator Show Very Bullish

The current skew indicator is showing very bullish signal, the implied volatility skew shows the market's bias for pricing in volatility risk to the option premium of downside puts and upside calls.

The implied volatility for upside calls is increasing relative to downside puts, then that suggests the market is pricing in a larger sentiment for upside move.

Technical Analysis - MACD and Multi-timeframe (MTF)

As Micron have risen by more than 5% on Monday 16 Dec trading, this show that Micron could be going for a new bullish crossover, but I think we need to consider long term, as the general semiconductor space did not perform well, with Nvidia and ARM losing 1.6% and 4.5% respectively.

Micron surge on Monday (16 Dec) could be riding on the back of Broadcom as semiconductor sector did not perform for most of the names, except for Broadcom and Micron, as we can see Micron short-term and long-term MA is converging.

Though MACD is presenting a bullish upside, but the signal is not too clear, we need to be aware that Micron wa trading below both short-term and long-term MA before Monday, and MTF have also given a neutral signal ahead of its earnings.

So I would think we need to look at Micron stock price performance for Tuesday and see if it really have the strength to gather more upside and give a more confirmed signal.

Summary

I would think Micron current price is considered cheap as it was at its highs of 150 in June, considering that AI demand for DRAM could help to power Micron earnings, I would be looking to load Micron as I continued to monitor its price action today (17 Dec).

Appreciate if you could share your thoughts in the comment section whether you think Micron could beat earnings and helped to push its stock price back to the 150s.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.