Micron to Report Q3 Earnings: Will the AI Boom Send MU Higher?
Micron to Report Q3 Earnings: Will the AI Boom Send MU Higher?
Analysts are raising their estimates for MU as investment trends in AI strengthen
Micron (MU) is scheduled to report Q3 earnings on Wednesday, June 26, after market close.
Artificial intelligence (AI) is likely to help propel revenue and earnings for the chip maker.
Micron options offer some elevated premiums ahead of earnings with an IVR of 100.3.
Micron (MU) is scheduled to report fiscal third-quarter earnings on Wednesday, June 26, after market close. The memory chip maker projected its earnings for the quarter ended in May at 45 cents per share, +/- 7 cents, and revenue of $6.6 billion, +/- $200 million.
However, analysts are slightly more optimistic, with the average estimate looking for earnings per share (EPS) of 51 cents and revenue of $6.7 billion, according to Yahoo Finance.
Those estimates have been revised higher over the past month as investment trends in artificial intelligence (AI) strengthen. Micron has surprised to the upside in four of the last five earnings reports.
According to TradingView, the average price target among analysts for MU sees the stock’s one-year price target at $158.20, a 12% rise from today’s price. The high target is $240.78, a 70% gain. Twenty-seven analysts hold a strong buy, while seven have a buy rating, two have a hold rating and only two have a sell rating.
Micron impressed investors last quarter and sent the broader market higher, especially technology stocks. That may help to provide a tailwind to the Nasdaq (/NQ), which is trading near a record high.
Micron to benefit from its memory chips amid AI boom
Micron produces memory chips, specifically dynamic random-access memory (DRAM) and not and (NAND), both of which are heavily used in AI infrastructure.
DRAM makes up 71% of MU’s revenue, while NAND accounted for 27%, according to Micron’s second-quarter financial statements. Those segments grew 21% and 27% quarter-over-quarter in Q2, respectively.
Looking at earnings from other chip makers over the past few weeks signals a bullish vibe for the industry. Broadcom (AVGO) reported earnings last week and impressed investors by beating revenue expectations, sending the stock 23% higher on the week. AI demand was mentioned as a big reason for the stellar results.
Trading Micron earnings
Options markets are pricing in an expected move of +/- 18.26 points, according to the June 28 expiration, which is two days after Micron’s announcement. The current implied volatility rank (IVR) is 100.3, meaning volatility is elevated compared to the past year.
That said, there are plenty of opportunities for traders who want to play credit strategies to sell the elevated premium in MU’s options market.
If you believe MU will surprise markets and move to the upside like other chip makers have this earnings cycle, selling a put spread offers a way to do that while giving a defined risk trade.
For example, selling the 137 put at the 41 delta and buying the 135 put for the June 28 expiration gives a max profit of 93 and a max loss of 107, with a probability of profit (POP) of 54%.
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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