Micron Earnings Preview — Is the Stock’s Rally Sustainable?

Shares are up 100% from April lows, and the company expects to invest billions in R&D

• Micron will announce quarterly earnings after the market closes on Wednesday.
• Its Stock is up 100% from the low print in April, during the heat of tariff worries.
• It’s expected to announce an earnings-per-share of $1.61 on $8.86 billion in revenue.
• A recently announced $200 billion investment plan will bolster US R&D and production.

Micron Technology (MU) is set to close out this quarter's earnings announcements on Wednesday after the market closes. The chipmaker has been the darling of the tech sector for the past few months, and the stock price has more than doubled in price from the low of $61.54 in April to the current $123.02 per share. It’s up 44% year-to-date.

While it seems the worries for the AI chip stocks are behind us, there's still plenty to learn about Micron’s plans for the coming months. Executives say they will invest $200 billion to create a more US-centric business, which will certainly help the company avoid unwanted tariffs. About $150 billion will be used to expand and expand and modernized production sites in Idaho, New Yorkand Virginia. The remaining $50 billion is earmarked for research and development.

In the last earnings call, CEO Sanjay Mehrotra offered encouragement: “Micron delivered fiscal Q2 EPS above guidance and data center revenue tripled from a year ago,” he said. “We are extending our technology leadership with the launch of our 1-gamma DRAM node. We expect record quarterly revenue in fiscal Q3, with DRAM and NAND demand growth in both data center and consumer-oriented markets, and we are on track for record revenue and significantly improved profitability in fiscal 2025.”

In relation to the US expansion project, Sanjay noted that it "will reinforce America's technological leadership, create tens of thousands of American jobs across the semiconductor ecosystem and secure a domestic supply of semiconductors — critical to economic and national security."

Interesting data points have arisen in the earnings announcements of the last few days and could affect Micron, First, we can look at the implied volatility of the options market to determine the expected stock price range this week and then compare it to further-dated cycles.

This week, the options market is projecting a +/- $10.23 stock price range based on current implied volatility. With the stock price hovering around $123 per share, this puts the earnings announcement at about 8% of the notional value of the stock. This is on the higher end of most earnings announcements, that typically fall between 5%-10% of the stock price. Looking to the September cycle of this year, 88 days away, we see a +/- $21.20 expected stock price range.

Half of the expected range for the next few months is being priced into this week's announcement — this tells us we should expect some big price swings after the announcement, and commentary is delivered from the executive team.

Bullish on Micron stock for earnings

If you're bullish on Micron for earnings, you want to see the company exceed earning-per-share (EPS) and revenue estimates, and you want to hear management describe a glorious series of triumphs for the rest of the year. This is especially important considering the stock has literally doubled from the low in April, suggesting market participants expect a big earnings beat if we're to expect this rally to continue.

Bearish on Micron stock for earnings

On the other side of the coin, if you're bearish on Micron for earnings, you want to see a slowdown in growth estimates, or a miss in the EPS or revenue department. This stock has gone berserk to the upside, and any slowed projections could send it falling back down.

Tune in to Options Trading Concepts Live on Wednesday at 11 a.m. CDT for an in-depth look at options trading strategies ahead of the Micron earnings announcement.

Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb  

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