Micron Reports Earnings Next Week. What Do Its Charts Say?High-end chip designer Micron Technology NASDAQ:MU will report earnings next Wednesday (Dec. 18), with analysts looking for about 84% in year-over-year revenue growth -- representing what would be the third straight quarter of 80%+ annual sales gains. Let’s see what MU’s fundamental and technical analysis say heading into the report.
Micron’s Fundamental Analysis
MU management has previously guided its fiscal Q1 results to $1.74 in adjusted earnings per share on $8.7 billion of revenue.
However, analysts’ consensus view as I write this is calling for Micron to do even better -- $1.77 in non-GAAP EPS on $8.7 billion in revenues. That would compare nicely to the $0.95 per share non-GAAP loss that the firm saw on $4.73 billion of revenues in the same period last year.
Of the 22 sell-side analysts that I found who track Micron, 12 have increased their fiscal Q1 earnings estimates recently, while 10 have cut them.
But as noted above, analysts’ consensus estimate looks for the company to continue its recent string of 80%+ year-over-year revenue gains. Clearly, the buildout of large language models and other AI-related needs has ramped up the need for Micron’s memory chips.
Micron has certainly been an operating-cash-flow beast, but has also spent plenty of that incoming money on new equipment.
On one hand, the firm generated $3.4 billion of operating cash flow during its fiscal Q4 ended Aug. 29, along with $8.5 billion for the trailing 12 months that concluded at that time.
However, capital expenditures (“capex”) during fiscal Q4 totaled $3.1 billion, as well as $8.4 billion in the 12 months ended Aug. 29. So, free cash flow was positive, but not by all that comfortable a margin.
Looking at the balance sheet, MU had an $8.1 billion cash position as of Aug. 29, along with $8.9 billion in inventories and $24.4 billion in total current assets.
Current liabilities added up to $9.3 billion, which included $106 million in shorter-term debt and $766 million of unearned revenue.
That left the firm's current and quick ratios at 2.64 and 1.68, respectively. That's quite strong by Wall Street norms, especially for an inventory-intensive business.
Total assets amounted to $69.4 billion, which included just the smallest amount of goodwill and other intangibles.
Meanwhile, total liabilities less equity came in at $24.3 billion. That included $11.2 billion in long-term debt – a level that doesn’t look like the end of the world, but that Micron will probably need to manage over time.
Still, MU’s balance sheet appears healthy overall by industry norms.
Technically Speaking ...
Now let’s look at Micron’s chart going back to April 2022:
Readers will see that the stock rallied more than 200% from its $48.45 September 2022 intraday low to its $157.54 June 2024 intraday high.
MU then pulled back between July and September of this year, but found support at close to the 61.8% Fibonacci retracement level of the entire 2022-2024 rally. That set up the range that the stock has been trading in ever since.
Now let’s zoom in and look at Micron’s chart from just April 2024 to December 2024:
In this time frame, readers will see that MU has been trading within a series of lower highs and higher lows -- creating what’s called a “pennant” formation (denoted by the purple lines above).
Micron’s pennant appears to be closing as earnings approach, which could be significant. Historically, violent market reactions often ensue when a stock’s pennant or triangle pattern closes.
MU isn’t far from breaking below the pennant’s lower trendline. Should that happen, there will be nothing technical standing between that trendline and Micron’s August/September double-bottom lows.
Also note that Micron is trading below its 21-day Exponential Moving Average (or “EMA,” marked with a green line), its 50-day Simple Moving Average (or “SMA,” denoted with a blue line) and its 200-day SMA (the red line). This sets up a series of obstacles that could serve as resistance.
That said, taking and holding these levels could bring the swing crowd on board, while also forcing portfolio managers to increase long-side exposure.
Meanwhile, readers will see a largely neutral reading for Micron’s Relative Strength Index, as denoted by the gray line at the chart’s top.
Similarly, MU’s Moving Average Convergence Divergence indicator (or “MACD,” marked with gold and black lines and blue bars at the chart’s bottom) tells us very little.
All three components -- the histogram of the 9-day EMA (blue bars), the 12-day Exponential Moving average (or “EMA,” marked with a black line) and the 26-day EMA (gold line) are running together. They’re also all close to zero, which is historically a neutral sign.
(Moomoo Markets Commentator Stephen “Sarge” Guilfoyle had no position in MU at the time of writing this column.)
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