Business

MU shares fall to lows amid optimism about earnings; Chip Leader AEHR scores new high before results


Micron (MU) is set to report income, along with Aehr test system (AEHR), one of the strongest performing stocks in the chip equipment group. MU stock has fallen to a low, but the memory and storage solutions provider has struggled to keep up with the leaders in the semiconductor sector.




X



Other companies on the week’s earnings calendar include Carnival (CCL) And Lululemon Athletica (LULU).

The carnival is like a post-Covid turnaround story as business gradually returns to normal. CCL stock looks poised to outperform as the stock rallied nearly 5% on Feb. 1 on higher volume. But the seller has been in control ever since.

The result is due to Monday before opening. Revenue growth has accelerated in recent quarters, mainly due to ease of comparison, but demand is also picking up. Shares spiked December 21 after the company reported a 198% increase in revenue. At the time, the company cited strong bookings in November and December. According to Zacks, revenue for the current quarter grew 168% to $3.45 billion.

For the current fiscal year 2023, the company is expected to post a loss of 7 cents in stock, with the potential to return to profitability in fiscal 2024.

MU Stock In Aggregate Mode

Micron’s earnings report, due Tuesday after closing, will be closely watched by tech investors. The company’s December report didn’t match Wall Street’s as the company reported larger-than-expected losses and slightly lower-than-expected revenue. Micron also forecast a larger-than-expected loss for the quarter ended February and slightly higher-than-expected revenue growth.

Chief executive officer Sanjay Mehrotra said memory supply was too much and not enough demand, leading to higher inventory levels. PC sales are slowing, with server sales expected to slow this year, though Mehrotra says free cash flow along with revenue should start to recover before the end of the year.

For the next quarterly report, look for an adjusted loss of 66 cents a share, with revenue falling 51% to $3.76 billion.

Deck Aehr and Lululemon Inspection System

In the chip device group, Aehr Test Systems does not suffer from weak demand, especially when it comes to test equipment for the automotive and mobile integrated circuit markets.

Shares jumped on Tuesday on news that the company had received a large order from a major customer for silicon carbide. Aehr shows strong earnings growth in recent quarters, along with rising annual earnings estimates.

But growth is expected to slow in the current quarter, with adjusted profit up 14% to 16 cents a share. Revenue growth is also expected to slow, growing 11% to $17 million. Results will be available on Thursday after closing.

For the current fiscal year ending May, annual earnings are expected to grow 43%, with growth accelerating in FY2024, up 83%. Estimates have been directed higher.

Meanwhile, sellers have ordered action in Lululemon in recent months, sending LULU stock down more than 20% from its highs.

The weakness comes despite the stellar record of profit and revenue growth.

Results will be available on Tuesday after closing. Adjusted profit rose 26% to $4.25 a share, with revenue also up 26% to $2.69 billion.

Options trading strategy

A basic options trading strategy around earnings — using call options — allows you to buy stocks at a predetermined price without much risk. Here’s how the options trading strategy works and what recent call trading looks like for MU stock.

First, identify the top-rated stocks with bullish charts. Some may be established in solid foundations at an early stage. Others may have broken out and received support at their 10-week lines for the first time. And a few may be trading near the highs and not giving up on many price levels. Avoid stocks that extend too far from the appropriate entry point.


Check IBD New OptionsTrader app about options education, trading ideas and more! Download from Apple App Store Today.


In options trading, a call option is a bullish bet on a stock. A put option is a bearish bet. A call option contract gives the holder the right to buy 100 shares of a stock at a specified price, known as the strike price.

Puts are for weak performers with a bearish chart. The only difference is that the money strike price is just below the underlying stock price. A put option gives the holder the right to sell 100 shares of a stock at a specified price.

You make a profit when the stock falls below the strike price with the put option.

Check strike price

Once you’ve determined your call’s earnings setup, check the strike price on your online trading platform or at cboe.com. Make sure the option is liquid, with a relatively tight spread between the bid and ask prices.

Find the strike price right above the underlying stock price (out of money) and check the premium. Ideally, the premium should not exceed 4% of the underlying stock price at that time. In some cases, the monetary strike price is also waived as long as the premium is not too expensive.

Choose an expiration date that suits your risk goals but remember that time is money in the options market. A close expiration date will have a cheaper premium than an expiration date. Buying time in the options market costs more.


See which stocks in the portfolio chart


This options trading strategy allows you to take advantage of the bullish earnings report without too much risk. The risk is equal to the cost of the option. If the stock deviates from earnings, the most you can lose is the amount payable on the contract.

Trading MU stock options

Here’s how to trade recent call options looking for Micron.

When MU stock was trading at around 61 on Friday morning, a slightly losing weekly call with a strike price of 62 (which expires on March 31) comes with a premium of around $1.90 for per contract, or 3.1% of the underlying stock price at the time.

One contract gives the holder the right to buy 100 shares of Micron at $62 a share. The most that can be lost is $280 – the amount paid for a 100-share contract.

Taking into account the premium paid, Micron stock would have to break above 63.90 for trading to start making money (62 strike price plus $1.90 premium per contract).

Follow Ken Shreve on Twitter @IBD_KShreve for more stock market analysis and insight.

YOU MIGHT ALSO LIKE:

Best growth stocks to buy and watch

Catch the next big winning stock with MarketSmith

IBD Stocks Of The Day: See How To Find, Track And Buy The Best Stocks

IBD Digital: Unlock IBD’s premium stock listings, tools and analysis today

The market’s recovery has yet to do this; What to do now

news7f

News7F: Update the world's latest breaking news online of the day, breaking news, politics, society today, international mainstream news .Updated news 24/7: Entertainment, Sports...at the World everyday world. Hot news, images, video clips that are updated quickly and reliably

Related Articles

Back to top button