Micron share price moving higher, with Q3 earnings on watch
Having fallen close to 15% from its all-time high in April, can Micron’s Q3 results deliver this week?
When does Micron report earnings?
Micron Technology Inc (All Sessions) is set to release its Q3 financial results on 30 June, after market close.
Micron earnings – What to expect?
Micron has previously benefitted from the stay-at-home situation, where increased demand for PCs and data centre services have boosted chip demand. As economies move towards normalisation, digital transformation may prove to be a longer-term trend as increased cloud demand and corporate IT servers upgrades may continue to provide tailwinds for Micron’s businesses. This also comes on the back of a global shift towards 5G technology, with improving adoption rate potentially supporting smartphone unit sales ahead. Micron’s mobile business unit accounts for close to 30% of overall revenue.
Key risk for Micron may include tensions between US and China. Micron’s sales were negatively affected when the US government moved to restrict dealings with Huawei as Huawei is its biggest customer, accounting for close to 10% of overall sales. The uncertainty in obtaining new licenses needed to sell its memory chips to China's Huawei may continue to be a headwind, restricting its sales potential.
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In its previous 2Q 2021 earnings call, the management highlighted that ongoing economic recovery and pent-up demand are expected to drive strong demand growth for its businesses, which may be reflected in its upcoming Q3 results. It was pointed out that the DRAM market is in severe shortage while the NAND market is showing signs of stabilization in the near term. The demand-supply imbalance situation may support higher-than-average selling prices, with upcoming Q3 2021 guided to have higher margins from Q2 2021.
| Q2 2021 | Q3 2021 (Guidance) | |
| Revenue | $6.2 billion | $7.1 billion + $200 million |
| Gross margin | 32.9% | 41.5% + 1% |
| Diluted EPS | $0.98 | $1.62 + $0.07 |
Source: Micron Technology, Inc
How to trade Micron earnings
Micron Technology Inc (All Sessions) current forward P/E ratio stands at 8.3, coming in below the semiconductor industry median of 17.8 and the technology sector median of 18.3. Its historical five-year revenue growth stands at 9.13%. Compared to some of its global peers, sales growth may outperform major semiconductor players such as Intel Corporation and SK Hynix Inc, but lagged behind NVIDIA Corp (All Sessions) and Advanced Micro Devices Inc (All Sessions).
Currently, the stock has 30 ‘buy’ recommendations, five ‘holds’ and zero ‘sells’. The Bloomberg 12-month consensus target price of 116.25 suggests a potential 40.6% upside from current price.
Micron shares – Technical analysis
Ahead of its results release, Micron’s share price is attempting to break above a downward trendline which has been resisting prices on previous three occasions. The MACD indicator has formed higher lows, potentially suggesting that selling momentum is slowing and the near-term downtrend may be susceptible to a reversal.
That said, prices may have to overcome a key resistance level at US$84.00 to drive further upside. This comes on the back of the 50-day MA which now served as a resistance line, in coincidence with the Fibonacci 23.6% retracement level. Near-term support may be at US$76.00, where prices remain supported on previous three occasions.
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