Photographer: Tomohiro Ohsumi/Bloomberg


Micron's 21% March Rally Sets High Bar for Earnings on Thursday

  • Series of analyst price target hikes has fueled recent run
  • Morgan Stanley cautions that further upside may be limited

Micron Technology Inc. has a lot to live up to with its earnings report this week.

The memory-chip maker’s shares have surged 44 percent this year, including a 21 percent run in March alone. That outperformance may mean it will take more than the usual beat-and-raise quarter to impress traders when the company posts fiscal second-quarter results after Thursday’s market close.

In the past two weeks alone, five analysts have raised their price targets on the shares. Nomura set a Street-high $100 target on March 12, arguing that DRAM pricing trends are set to improve in the second calendar quarter and that Micron is in the early stages of a major break higher. Four days later, Baird analyst Tristan Gerra matched the $100 target, saying that price declines in Micron’s other major product, NAND flash memory, are more muted than expected. Their forecasts imply about a 69 percent gain from current trading levels.

While most analysts remain bullish on Micron’s fundamentals, not all of them say this should translate into further outsized share gains. Morgan Stanley’s Joseph Moore said in a note Monday that Micron’s strong business trends are increasingly being discounted in the stock and upside in the shares is likely to be “more limited from here.” Moore also said Micron is space-constrained and he wouldn’t be surprised if it announces construction of a new fabrication facility this week or at the company’s May 21 analyst day.

From a technical perspective, the shares broke out above the 50-day moving average of $46.74 on Feb. 15. However, the 14-day relative strength index rose to more than 70 on March 5, moving the stock into overbought territory, where it has remained.

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