Can Micron Technology Continue This Monster Run?

With shares of Micron Technology (NASDAQ:MU) trading around $10, is MU an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Micron Technology engages in manufacturing and marketing semiconductor devices worldwide. Semiconductor chips are an integral part of technological expansion. As countries across the globe embrace new products, Micron Technology stands to continue its healthy profit stream. The company is well-positioned in a sector that is one of the primary drivers of global growth.

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Head on over to the next page to explore the technical landscape of Micron Technology’s stock…

T = Technicals on the Stock Chart are Mixed

Micron Technology has seen a steady long-term decline in its stock price since it hit highs in the year 2000. Currently, the stock is seeing a magnificent run and looks to be headed towards a critical selling zone. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Micron Technology is trading above all of its rising key averages which signal a strong uptrend in the near-term.

MU

(Source: Thinkorswim)

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Taking a look at the implied volatility (red) and implied volatility skew levels of Micron Technology options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Micron Technology Options

46.97

26%

30%

What does this mean? This means that investors or traders are buying a small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

April Options

Flat

Average

May Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a small amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Improving Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Micron Technology’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Micron Technology look like and more importantly, how did the markets like these numbers?

2012 Q4

2012 Q3

2012 Q2

2012 Q1

Earnings Growth (Y-O-Y)

4%

-30%

-50%

-122%

Revenue Growth (Y-O-Y)

3%

-14%

-9%

2%

Earnings Reaction

10.69%

-6.92%

-0.66%

-7.67%

Micron Technology has improved on its earnings and revenue growth rates in the latest quarter. From these figures, the street seems to have been very excited by the most recent numbers posted by the company.

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P = Excellent Relative Performance Versus Peers and Sector

How has Micron Technology stock done relative to its peers, Spansion (NYSE:CODE), MoSys (NASDAQ:MOSY), Intel (NASDAQ:INTC), and sector?

Micron Technology

Spansion

MoSys

Intel

Sector

Year-to-Date Return

50.98%

-11.37%

36.10%

2.43%

8.23%

Micron Technology has dominated its peers and sector in year-to-date performance.

Conclusion

Micron Technology participates in an industry that will continue to see explosive growth due to the integral part that its products contribute to global expansion. The stock has been in a downtrend in the long-term but has picked-up steam in the near-term on exciting earnings and revenue growth rates. Relative to its peers and sector, Micron Technology has led in performance by wide margin. Look for Micron Technology stock to continue to OUTPERFORM.

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