What You Need to Know Ahead of Micron Technology Earnings Report

25 Eyl

Micron Technology Inc. (NASDAQ: MU) is set to release its fiscal fourth-quarter earnings report after market close today, Wednesday, September 25, 2024. Investors are eagerly anticipating this report, as it could provide crucial insights into the state of the memory chip industry and the broader tech sector.

Key Takeaways:
- Analysts expect Micron (NASDAQ: MU) to swing to a profit this quarter, with year-over-year revenue expected to almost double.
- Key metrics to watch include inventory levels and guidance for the next quarter.
- Micron's relationship with Nvidia (NVDA) and its role in the AI hardware space is expected to be a central focus.

Earnings Expectations:
For Q4 2024, analysts are forecasting revenue of $7.65 billion, a substantial jump from the $4.01 billion reported in Q4 2023. This rise is largely driven by the growth of Micron’s memory chips used in AI data centers and high-performance computing systems. Earnings per share (EPS) are expected to come in at 84 cents, a significant improvement from last year’s loss of $1.31 per share.

1. Revenue Growth:
Micron (NASDAQ: MU) is expected to post significant year-over-year revenue growth, fueled by strong demand for AI-related memory chips. The company's partnership with Nvidia has been a key driver in this sector, as high-bandwidth memory (HBM) used in AI data centers continues to see robust demand. Analysts believe Micron’s growth trajectory will be further accelerated by the ongoing AI boom.

2. Profitability:
After reporting losses last year, Micron (NASDAQ: MU) is anticipated to return to profitability with net income of $1 billion for the quarter. This marks a major turnaround, thanks to increased demand for high-performance memory and storage solutions used in AI, edge computing, and data centers.

3. Inventory Levels:
One key area to watch will be Micron’s inventory levels. The company has been dealing with growing inventories as demand for legacy memory chips has waned. Both Citi and Morgan Stanley recently lowered their price targets for Micron (NASDAQ: MU) due to concerns about high inventories and weak demand for older memory components. However, analysts expect inventory issues to ease by the end of the year, with improvements in gross margins and revenue in the coming quarters.

Business Outlook:
Looking ahead, analysts are optimistic about Micron’s potential growth. The AI-driven upgrade cycle is expected to drive demand for edge devices and data center memory solutions, while a possible server refresh could also provide tailwinds. Analysts estimate that Micron (NASDAQ: MU) will generate $8.4 billion in revenue in the first quarter of fiscal 2025, with EPS expected to rise to $1.45.

Market Sentiment:
Despite these positive views, some caution remains in the market. While Micron’s stock has gained about 10% year-to-date, it has also faced volatility, especially in the wake of mixed earnings reports from its competitors, such as Broadcom and Nvidia. This has led to reduced enthusiasm for the AI trade, though a positive earnings report today could reignite investor interest in AI-related semiconductor stocks.

Technical Analysis:
From a technical standpoint, Micron Technology stock (NASDAQ: MU) is showing signs of bullish momentum. As of today, the stock is up 1.50%, rebounding from a presumed downtrend. It is trading within a falling wedge pattern on the daily chart, a bullish reversal indicator. If Micron Technology stock (NASDAQ: MU) delivers a positive earnings surprise, the stock could break through the upper boundary of this pattern, leading to a potential rally toward its 200-day moving average around $105 and possibly higher toward the $130 resistance pivot.

Key Technical Indicators:
- Relative Strength Index (RSI): Currently sitting at 52.00, the RSI indicates a neutral stance, but given the earnings catalyst, the stock is poised for a potential breakout.
- Support Levels: The stock has solid support around $86. A drop below this level could signal further downside risk.
- Resistance Levels: Overhead resistance is found near $100, with the 200-day moving average acting as the next significant level to break around $105.

Investor Sentiment:
Investor sentiment in the options market has grown increasingly bullish in recent weeks. Call options far outweigh put options, with large positions held at the $95, $100, and $155 strike prices, expiring shortly after the earnings report. This suggests that traders are betting on a positive earnings outcome that could propel the stock higher.

Conclusion:
Micron’s earnings report later today is shaping up to be a pivotal moment for the company and its investors. Strong results driven by demand for AI-related memory chips could not only send the stock higher but also restore broader enthusiasm for the AI trade, which has faltered in recent months. However, traders will need to keep a close eye on inventory levels, management’s guidance, and market sentiment to assess the stock's future direction.

In short, Micron Technology stock (NASDAQ: MU) may stand at the cusp of becoming one of the biggest bargains in the semiconductor space, with upside potential fueled by AI and data center demand, but tempered by near-term concerns over inventories and legacy products.