What’s up?

Semiconductor giant Micron Technology Inc. will report Q2 earnings after market close on Wednesday.

Why is it important?

In general

According to the consensus forecast, earnings per share will account for $1.68 (-40.4% Y/Y), while the revenue will equal $5.84 billion (-20.5% Y/Y). As you can see, the financial results are expected to be rather poor. The company itself made weak guidance for the second quarter.

For investors

There is sense to look into this stock for one important reason: it has the P/E ratio of just 3.20, which is quite cheap. At the same time, it’s natural that Micron is trading this way. So far, the company has been facing a lot of problems including falling prices of memory chips and the declining demand for smartphones. In addition, the demand for data centers is slowing down, especially in China. Finally, as the interest in cryptocurrency subsided, the demand for graphics cards went down. All of this means that Micron has troubles with customers. 

There are forecasts that the situation with memory chips will improve in the second half of the year. However, for now, that is merely a hope without substantial grounds. As a result, despite the fact that the stock looks cheap, we see the risk of its further depreciation.   

For traders

The stock found support at $36.55 at the beginning of March. The overall picture on large timeframes looks like the price is trying to base. The nearest support is at $38.60 (50-day MA). Positive earnings report will send Micron stock to February high and the 200-day MA in the $44.00 area. On the other hand, a bad report and a decline below $38.00 can make the price reverse down and take the 200-week MA in the $29.50 area for a target as the market embraces the gloomy situation.

Micron Technology, daily chart