Micron (MU) Better Earnings Per Share Loss Create Path To Profitability

In December, Micron posted top- and bottom-line beats for its fiscal Q1 and gave an encouraging full-year forecast on improving supply and pricing levels for its DRAM (Dynamic Random Access Memory) chips.

Micron CEO has indicated that the company is "in the very early stages of a multi-year growth phase catalyzed and driven by generative AI [artificial intelligence]." The recent upgrade for Micron from Hold to Buy show that the worst is behind MU and the best is yet to come. Market believes Micron can break out to higher highs on improvements in supply and demand, and its compelling growth-to-valuation ratio among larger-cap AI stocks.

MU's fiscal second-quarter results is expected to post a per-share loss of 26 cents, this is a huge improvement over its year-ago loss of $1.91 per share. Revenue is forecast to arrive at $5.3 billion, up 43.2% year-over-year (YoY).

Technical have shown that Micron is currently on an uptrend, if we look deeper, Micron does have much of the Bull power (this mean traders and investors are much into LONG or buying position).

If this trend continue to build up towards Micron earnings after Wednesday close, we might see an upside move. Do also take note of the general sentiment of the market on Wednesday as Fed commence their FOMC meeting.

MU last reported earnings on 20 Dec 2023 after the market close (AMC). MU shares gained +8.6% the day following the earnings announcement to close at 85.37. Following its earnings release, 88 days ago, MU stock has drifted +9.2% higher.

From the time it announced earnings, MU traded in a range between 79.15 and 101.85. The last price (93.25) is closer to the higher end of range.

Estimated implied straddle for upcoming earnings is 10.8%. As we have seen its peers, SK Hynix have a significant upside after its earnings, this could be an indicator of the growth phase being catalyzed by the demand from Generative AI.

We could see at least 3-5% move after Micron release its earnings.

The options market overestimated MU stocks earnings move 67% of the time in the last 12 quarters. The predicted move after earnings announcement was ±6.3% on average vs an average of the actual earnings moves of 4.8% (in absolute terms).

This indicate an overvalued option valuations, this could mean some price volatility but it would also mean that there is a chance that Micron could trend higher due to its revenue increase though EPS would be still at a loss.

Micron have been one of the major chip makers in memory, and we could see that there have been a CAGR growth of 6.9% from 2024 to 2033. Micron should be coming out of their worst period, recovery in progress.

We might not see Micron going into profitable yet as it should show improvement in loss earnings per share. But I would be expecting a better outlook forecast from Micron.

From how the memory chips demand is growing, this has become almost quite similar to the other hardware required for running AI workload. One of the important components in Ai to bring what was built to end users meaning consumers would be memory chips.

This chip exist in almost what we have everyday, or interact everyday, there will be more and more such devices or IoT (internet of things) being deployed, whether in office, in public places or at home.

Appreciate if you could share your thoughts in the comment section whether you think Micron would be able to post a better-than-expected results and narrow its earnings per share loss?

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.