As earnings season gets underway, investors appear to be taking a more cautious stance towards Micron Technology Inc. (MU) than they have in past earnings announcement lead-ups. Trading in options markets are predicting the typical volatility, but this time around the usual bullishness is lacking. Despite this more unusually neutral stance, JPMorgan believes the microchip manufacturer can build on its 44% rally since the start of the year with another 38% rise to $82 a share, according to CNBC.

Cautious Traders, Bullish Bank

Meanwhile, as Micron shares sit just 5% below their recent high for the year, Susquehanna’s head of derivative strategy Stacey Gilbert noted the unusual “two-way sentiment” characterizing options trading on Micron ahead of the company’s earnings report on Wednesday, also according to CNBC. The stock’s implied volatility is around its typical pre-earnings report level of 7% to 8%, but rather than mostly call buying, option trading has been marked by a mix of bearish and bullish sentiment.

While options traders are betting on a big move in either direction, JPMorgan is decidedly bullish. One of the bank’s analysts, Harlan Sur, wrote in a note to clients earlier this week, “Stay long Micron heading into earnings. We see further upside in Micron shares as the team is executing well in an overall constructive S/D [supply/demand] memory environment,” as quoted by CNBC. (To read more, see: Is Micron Bound to Continue Its Upward Spree?).

Boost from Chip Demand

As a key supplier of memory chips to the cloud computing market, growing demand in that market is pushing up prices on chips and boosting Micron’s sales and earnings. Cloud computing workloads are expected to quadruple over the next five years and cloud computing capital expenditures are expected to triple by 2021, according to a survey of chief information officers conducted by JPMorgan.

The chipmaker is expected to report quarterly earnings per share (EPS) of $3.12 on Wednesday, a year-over-year increase of 93%. Revenues are estimated to be $7.75 billion, a 39.30% year-over-year increase. For the 2018 fiscal year coming up at the end of August, Micron is expected to report EPS of $11.56, a 133% year-over-year increase, which is expected to shrink to $10.86 per share for 2019. (To read more, see: Micron to Gain on Strong NAND-DRAM Trends).

The drop-off in forecasted earnings for next year could have a lot to do with expectations that the upward pressure on memory chip prices will weaken. Analysts at Morgan Stanley see slight increases in DRAM prices through to the end of calendar Q3, but declines from that point on. The bank expects NAND prices to be soft in Q3, according to MarketWatch.

One wildcard facing prices concerns the recent probe into memory chipmakers, including Micron, by Chinese regulators. Several reports have indicated that China had spoken with Micron executives about getting control of rising prices and reigning them in. As China accounts for around one quarter of global demand for memory chips, the escalation of trade wars could also dampen Micron’s future performance.