Is Micron Technology A Risky Investment?

With shares of Micron Technology (NASDAQ:MU) trading around $9, 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 is a global manufacturer and marketer of semiconductor devices, packaging solutions, and semiconductor systems for use in computing, consumer, networking, automotive, industrial, embedded and mobile products. The company operates in four segments: NAND Solutions Group, DRAM Solutions Group, Wireless Solutions Group and Embedded Solutions Group. Micron Technology’s products include: NAND Flash Memory, Dynamic Random Access Memory and NOR Flash Memory. Through its segments, Micron Technology is able to provide important components for technology products exisiting in various industries. As these industries continue to expand worldwide, Micron Technology is poised to see rising profits well into the future.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

T = Technicals on the Stock Chart are Strong

Micron Technology stock has suffered in recent years but seems to have found value between the in the single digit price range. The stock has bounced off of the lower end of its established range with conviction so it may be getting ready to break higher. 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 its rising key averages which signal neutral to bullish price action in the near-term.

MU

(Source: Thinkorswim)

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

50.6%

73%

72%

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

Put IV Skew

Call IV Skew

May Options

Average

Average

June Options

Average

Average

As of today, there is an average demand from call and put buyers or sellers, neutral over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral 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 Mixed 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)

3.45%

-42.11%

-76.27%

-557.14%

Revenue Growth (Y-O-Y)

3.43%

-12.25%

-8.27%

1.54%

Earnings Reaction

10.69%

-6.92%

-0.66%

-7.84%

Micron Technology has seen mixed earnings and revenue figures over the last four quarters. From these figures, the markets were excited about Micron Technology’s most recent earnings announcement.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

P = Average Relative Performance Versus Peers and Sector

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

Micron Technology

Spansion

Intel

SanDisk

Sector

Year-to-Date Return

14.11%

-0.18%

22.83%

20.64%

7.31%

Micron Technology has been an average performer, year-to-date.

Conclusion

Micron Technology operates in an expanding semiconductor industry that provides valuable products to consumers and businesses worldwide. The stock has struggled in recent years but seems to have stabilized at bit and could be heading higher. The most recent earnings and revenue figures really pleased investors so the stock has been doing well. Relative to its peers and sector, Micron Technology has been an average year-to-date performer. WAIT AND SEE what Micron Technology does this coming quarter.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.