Micron Technology, Inc. (MU) shares rose more than 8% during Thursday's session after the company reported better-than-expected second quarter financial results. Revenue fell 20.5% to $5.84 billion, beating consensus estimates by $20 million, and non-GAAP net income reached $1.71 per share, beating consensus estimates by five cents per share.
While falling DRAM prices have taken a toll on revenue, the company cut its capital expenditure plans, and inventories have been depleting at a fast rate. Management predicts that DRAM prices will improve by the fourth quarter along with NAND prices in the first quarter. The company also indicated that it would continue to reinvest half of its free cash flow (FCF) into repurchases.
Analysts have mixed opinions following the financial results. Citi analyst Christopher Danely downgraded Micron stock from Neutral to Sell, saying that "you can't swim against a tsunami," even though Micron is trying its best. However, Rosenblatt analyst Hans Mosesmann reiterated his Buy rating and $75.00 price target, saying that the industry cycle will bottom this year and that the company will come out ahead in the end.
From a technical standpoint, the stock broke down from trendline support in late February before bottoming in mid-March and retesting its highs following Q2 financial results. The relative strength index (RSI) is moving toward overbought levels with a reading of 67.04, but the moving average convergence divergence (MACD) could see a near-term bullish crossover. These indicators suggest that the stock could see some consolidation before a move higher.
Traders should watch for a breakout from trendline, 200-day moving average and R1 resistance near $44.13 toward trendline and R2 resistance at $47.37. If the stock fails to break out, traders should watch for some consolidation between R1 resistance at $44.13 and pivot point support at $40.74 before another attempt higher. A breakdown from the pivot point could lead to a retest of S1 support at $37.50.
The author holds no position in the stock(s) mentioned except through passively managed index funds.