How long could Micron stock’s uptrend last?
So far in this series, we’ve seen that overall, analysts are bullish on Micron Technology (MU), at least for 2018 since the memory market is on an uptrend. Micron stock has more than quadrupled since the start of 2016, from $14 to $61 currently. Despite the growth, it’s trading only five times its EPS, which is a fundamentally cheaper valuation. That’s because Micron is a cyclical stock and could fall significantly when the growth cycle ends.
Many analysts expect Micron’s earnings next year to fall 50% when the DRAM (dynamic random access memory) supply increases and brings an end to the two-year undersupply situation. Until then, most Wall Street analysts believe that Micron and its peers Western Digital (WDC) and Samsung (SSNLF) could continue to enjoy windfall gains. Even WDC is trading 5.8 times its EPS.
Short-term moving averages
Since Micron is a stock for short-term traders, we’ll look at the short-term MAs (moving averages). MA is the average price of a stock over a particular period. It helps when making a reasonable estimate of the stock price movement in the near future.
As you can see in the above graph, Micron’s 20-day MA is higher than its 50-day MA, which is higher than its 100-day MA, indicating an upward movement and technical strength. Even on May 31, when Micron stock fell almost 8% on one analyst’s downgrade, the stock was still trading at $57.60, which is above its 50-day MA of $53.
However, the MA trend was the opposite for WDC, with its 20-day MA lower than its 50-day MA and 100-day MA, which shows a technical weakness. Moving averages suggest that Micron stock might move upward on any positive news.
In the next part of this series, we’ll look at investor sentiment for Micron stock.
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