Will Micron Technology Rebound?

When Micron Technology (NASDAQ: MU) reported quarterly results and guidance that exceeded consensus estimates, conventional wisdom would assume that the stock would trade higher. Instead, the stock fell below $45 a share and continued heading south. Micron’s stock should rebound since its P/E is below seven times and its earnings are growing. But when will this happen?

On the last week of 2017 (week of Dec. 27), markets correctly expected Nanya Technology sold 451,000 of MU stock to repay its loans. At a share price below $42.44, options markets benefited because most options would expire worthless on triple witching day.

Even analyst upgrades in recent weeks failed to move MU stock in the near-term. The reiterated “buy” calls have price targets anywhere from $53 - $66. But as long as Nanya is selling the stock, Micron will under-perform in the tech sector. Looking ahead, with Samsung and SK Hynix stock holding up, chances are good that after the selling-pressure ends, Micron will resume its move upward.

Takeaway

Micron’s stock should rebound. The stock trades at a forward P/E of just below five times. The company will report growing profits, helped by strong DRAM and NAND demand and favorable pricing in early-2018. These conditions will likely persist throughout the year.