Micron: Limited Downside With 40%+ Upside

seekingalpha2021-09-30

Summary Although Micron had a positive earnings report yesterday (beating on the top and bottom line), the company lowered its guidance for the next quarter. Shares initially traded off on the news, ...

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Melvin888
2021-09-30
Melvin888
MU all the way
Bloom88
2021-09-30
Bloom88
😁

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nMicron: Limited Downside With 40%+ Upside\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-09-30 15:02 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4457714-micron-limited-downside-with-40-percent-plus-upside><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Summary\n\nAlthough Micron had a positive earnings report yesterday (beating on the top and bottom line), the company lowered its guidance for the next quarter.\nShares initially traded off on the news, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4457714-micron-limited-downside-with-40-percent-plus-upside\">网页链接</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"MU","symbol_name":"美光科技","start_time":0,"source_url":"https://seekingalpha.com/article/4457714-micron-limited-downside-with-40-percent-plus-upside","article_id":"1105028678","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=1105028678","pubTimestamp":1632985322,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Summary\n\nAlthough Micron had a positive earnings report yesterday (beating on the top and bottom lin","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"MU":"美光科技"},"translate_title":"微米：下跌有限，上涨40%+","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"MU":0.9},"content_text":"Summary\n\nAlthough Micron had a positive earnings report yesterday (beating on the top and bottom line), the company lowered its guidance for the next quarter.\nShares initially traded off on the news, but have since stabilized.\nThe risk/reward profile on the stock is very attractive going forward.\n\nMicron Technology (MU) reported earnings last night and the stock is in the process of adjusting to the new information this morning.\nEven though the company beat on the top ($8.27B in sales vs. $8.21B consensus) and bottom lines ($2.42 EPS vs. $2.33 consensus) forQ4 2021, Micron did lower its guidance for Q1 2022.\nAs you would expect, the stock initially sold off on that guidance shift...but shares have almost fully recovered this morning as investors have realized that the decline in Q1 sales is not driven by end-user demand. In fact, the lowered guidance is driven by PC manufacturers adjusting their memory and storage purchases due to the shortage of other components to complete PC assembling.\nIn other words, PC demand is still strong...but the PC manufacturers can't build enough PCs right now to meet demand due to the ongoing supply chain issues in the industry.\nWe think that this is great news for Micron investors as the \"coming winter\" (i.e., a prolonged downturn in the memory industry) will likely not be as bad as some analysts expect.\nRisk/Reward Profile for Micron\nAs investors, we should always be looking for stocks with a positive risk/reward profile (i.e., more upside potential than downside risk).\nWe believe that Micron's current profile is extremely attractive...with only 3%-5% of potential downside risk and 40%+ potential upside!\nLooking at the chart, the stock is comfortably holding above the near-term support level of $70.00 post earnings.\n\nWe believe that this $70.00 level (which represents ~8.0x trough earnings in 2022) will continue to act as support going forward (less than 5% downside from here).\nThat said, the upside potential here could be huge if we get even a little multiple expansion.\nEven though several analysts lowered their price targets on Micron post earnings, the lowered price targets still offer significant upside from current levels.\nNote that CFRA reduced its target from $108.00 to $90.00 and Mizuho reduced its target from $97.00 to $90.00...but both analysts maintained their buy rating on the stock.\nThat said, the new consensus estimate (across all 28 Wall Street analysts) is currently $105.00 per share...representing over 40% upside from here.\nBased on some simple math, this consensus estimate is not pie in the sky.\nAlthough expectations for fiscal 2022 have been reduced, the consensus estimate for EPS in fiscal 2023 (~$10.70/share) is expected to be back in line with 2021 levels with 15% growth expected in fiscal 2024 (to $12.31/share).\nThis doesn't exactly sound like a prolonged downturn to me.\nSo if we can get some nominal multiple expansion to say 10x, that would equate to a $107.00 stock price (based on fiscal 2023 EPS estimates of $10.70 per share)...which is right in line with the consensus price target.\nTrading Plan for Micron\nBased on the analysis above, we think Micron is \"Strong Buy\" at current levels.\nThat said, if you are concerned about future downside volatility in the general market, there are a few option strategies to consider to reduce your risk.\nCash-Secured Puts\nWriting cash-secured puts on high-quality stocks that you would like to own at a lower price is a great way to generate income while patiently waiting for the right price (i.e., it's a great way to acquire stock in a volatile market).\nThe three main data points we look at when analyzing a cash-secured put trade are:\n\nPremium Yield% (or Average Monthly Yield%): Measure of expected return on capital assuming that the option expires worthless (out-of-the-money).Assumes that the option is fully cash secured.\nMargin-of-Safety %: Measure of downside protection or the percentage that the underlying stock could decline and would still allow you to break even on the option trade.\nDelta: A good proxy for the probability that the put option will finish in-the-money.\n\nNote that there's always a negative correlation between Premium Yield and Margin of Safety: The higher the Premium Yield for a given strike month, the lower the Margin of Safety.\nAn investor always should be honest with themselves about their risk tolerance. Selling CSPs can be adapted to suit your needs.\nNow let's look at the cash-secured put analysis for Micron. We're focused on the November monthly contract that expires on 11/19/21.\n\nBecause we like the stock at current levels, you could write a put with a tight strike price and get paid a very nice premium right now.\nWe currently like the following put options for Micron:\n\nMU Nov 19th $70.00 put option @ ~$2.72 with an AMY% of 2.3%, a Margin-of-Safety of 4.2%, and a Delta of 35.\nMU Nov 19th $67.50 put option @ ~$1.87 with an AMY% of 1.6%, a Margin-of-Safety of 7.7%, and a Delta of 27.\n\nThese options would generate some nice short-term income and give you a little downside protection (and a lower cost basis).\nCovered Calls\nIf you already own Micron or are willing to buy it today...you can always use a covered call strategy to generate some short-term income, maintain some upside exposure, and mitigate some downside risk.\nWith a covered call, you are agreeing to sell your stock at a higher price (your call option strike price) but you get to keep your call option premium either way.\nNow let's look at the covered call analysis for Micron. We're focused on the November monthly contract that expires on 11/19/21.\n\nBecause we like the upside potential here, you will want to give yourself some room for the stock to run (so the focus should be on higher strike prices).\nWe currently like the following call options for Micron:\n\nMU Nov 19th $80.00 call option @ ~$1.67 with an AMY% of 1.3%, an Upside Profit of 11.7%, and a Delta of 29.\nMU Nov 19th $82.50 call option @ ~$1.16 with an AMY% of 0.9%, an Upside Profit of 14.4%, and a Delta of 22.\n\nThese options would also generate some nice short-term income and give you a little downside protection (and a lower cost basis).\nSummary\nIn summary, we love the risk/reward profile of Micron right now and believe that the stock is a strong buy at current levels.\nThat said, there is nothing wrong with using option strategies to generate some income and help mitigate some downside risk.","kind":"news","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":865288720,"gmtCreate":1632987547980,"gmtModify":1632987548304,"author":{"id":"3577938728188071","authorId":"3577938728188071","name":"Melvin888","avatar":"https://static.tigerbbs.com/1f7e36200d6d8c6159f6d35c041d8e3e","vip":1,"crmLevel":5,"crmLevelSwitch":0,"idStr":"3577938728188071","authorIdStr":"3577938728188071"},"htmlText":"MU all the way&nbsp;","listText":"MU all the way&nbsp;","text":"MU all the way","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/865288720","repostId":1105028678,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"CN"},{"id":865215885,"gmtCreate":1632986362755,"gmtModify":1632986363147,"author":{"id":"3579815534956625","authorId":"3579815534956625","name":"Bloom88","avatar":"https://static.tigerbbs.com/033cde0577d9fb0c09cb6a7956e22236","vip":1,"crmLevel":3,"crmLevelSwitch":0,"idStr":"3579815534956625","authorIdStr":"3579815534956625"},"htmlText":"😁","listText":"😁","text":"😁","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/865215885","repostId":1105028678,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"CN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":12,"commentSize":2,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":false,"deviceId":"web-server-community-laohu8-v3","version":"4.29.4","shortVersion":"4.29.4","platform":"web","vendor":"web","appName":"laohu8","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1105028678"}