Micron stock: a coiled spring ready to pounce ahead of earnings?

Micron stock has staged a strong recovery this week, reaching near its highest level since July 2nd this year.

MU jumped to $1,016, up by nearly 40% from its lowest level in July, and technical and fundamental factors suggest further upside.

Micron stock technical analysis

The daily chart shows that the MU stock has been in a strong rebound in the past few days, rising from a low of $736 in July to the current $1,016.

This rebound has coincided with that of other memory companies like SanDisk, Samsung Electronics, and SK Hynix.

The stock remains above the ascending trendline that links the lowest levels since August 6 of this year.

It has remained above the 50-day Exponential Moving Average (EMA), which has provided it with substantial support.

The Relative Strength Index (RSI) has jumped to 60, its highest level since June 29 this year.

This is a sign that the stock is gaining momentum as investors buy the recent dip. 

It has remained above the Ichimoku cloud and the Supertrend indicator.

Therefore, there is a likelihood that the stock will continue rising as bulls target the next key resistance level of $1,253, its highest level this year.

This target is about 22% above the current level. A move above that level will point to more gains.

MU stock chart | Source: TradingView

Micron is firing on all cylinders this year

Micron is a top company in the high-bandwidth memory (HBM) industry, where it competes with top firms like SK Hynix and Samsung Electronics. 

The company’s business is firing on all cylinders as the artificial intelligence boom continues.

Just recently, its top clients like Nvidia, AMD, Google, and Amazon published strong financial results and boosted their forward guidance.

These numbers suggested that the companies will continue buying from Micron in the near term.

Micron’s last financial results showed that its growth accelerated in the third quarter, reaching $41.5 billion.

Revenue increased 74% from the second quarter and 346% from the same period a year earlier.

The company’s management believes that this growth will continue in the foreseeable future, with the fourth quarter rising to over $50 billion.

And this growth is expected in the coming years, with its revenue expected to hit $242 billion next year.

The company is benefiting from the rising demand for memory chips and the fact that the supply remains tight.

While Micron, Samsung, and SK Hynix are expanding their capacity, this supply will come online in the next few years.

Most importantly, there are signs that Micron is highly undervalued, with its forward price-to-earnings ratio being 13.85. In contrast, the S&P 500 Index has a multiple of 19.9, while the technology sector has a multiple of 22. Its Rule-of-40 multiple is even better.

The revenue and profitability growth, coupled with its valuation, explains why analysts are highly bullish on the company.

Data shows that the average target among analysts is $1,295, up by 27% from the current level. 

The next important catalyst for Micron shares will be the upcoming earnings later this month. Analysts expect these numbers to show that its revenue jumped to over $50 billion during the quarter.

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