Micron could tumble after earnings on downgraded FY guidance

MU has a "buy" rating and a positive earnings surprise prediction from Zack's, and buying any semiconductor stock at such an attractive P/E is never a bad bet. (MU's P/E is about 6, vs. the average of about 15.) However, MU is also getting some massive bearish options activity, and in my experience these big options traders usually know what they're doing.

Options traders may be betting that even if MU earnings beat analysts' lowered expectations, the headlines will focus on the year-over-year and quarter-over-quarter declines. More importantly, these options traders may be betting that Micron will make a statement revising downward its full-year earnings guidance. Guidance almost always matters more than earnings surprises.

Comentário:

I just noticed that Micron's fiscal calendar ends in September, so this is actually their Q4. So they won't be updating full-year guidance. However, the basic logic still stands. Earlier this year, Micron predicted earnings recovery in the back half of the year. We haven't seen that happen, and analysts expect earnings weakness to continue next quarter. If Q1 guidance comes in lower than Q4, as analysts expect it to, the stock could take a hit on that disappointment.

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Micron is indeed down after reporting earnings, despite an earnings beat ($.56 per share vs. analyst consensus estimate of $.48-51). The headlines highlight disappointing guidance; Micron does not expect improvement in the next quarter. The midpoint of the revenue forecast for Q1 ($5 billion) is only slightly above revenue for the present quarter ($4.9 billion). The midpoint of the earnings forecast ($.46) is below both the analyst consensus ($.48) and the present quarter ($.56). Gross margin is expected to decline from 30.6% to 26.5%.