Stay updated with the latest stock market news and insights
Weekly insights + SMS alerts
Micron Technology Inc. (MU) shares took a breather Friday, sliding more than 5% in premarket trading after a massive 15.74% rally the day before. The pullback came as investors locked in profits following the memory chipmaker's blowout earnings report, and as broader market sentiment softened — S&P 500 futures were down 0.6% ahead of the open.
It's a classic case of "buy the rumor, sell the news," but the underlying story remains compelling. Micron's earnings were nothing short of stellar.
Micron reported adjusted earnings per share of $25.11 on revenue of $41.46 billion, with adjusted gross margin reaching an eye-popping 84.9%. The company also guided for fiscal fourth-quarter adjusted EPS of about $31 on revenue of roughly $50 billion. Those are big numbers, and they reflect a business that's riding the AI wave hard.
Management said it has signed multi-year strategic customer agreements designed to make revenue and earnings more predictable. Analysts also pointed to sustained pricing strength for AI-focused DRAM and NAND memory as another positive sign.
But even great news can trigger profit-taking, especially when a stock has run up as much as Micron has. The broader risk-off mood weighed on high-growth semiconductor stocks, prompting investors to cash in some chips.
Bank of America Securities analyst Vivek Arya told CNBC on Thursday that the memory industry is seeing a structural shift, not just a cyclical upswing. The driver? AI demand and tighter supply discipline.
Arya explained that AI depends heavily on memory, and high-bandwidth memory is three to four times harder to produce than conventional chips. That's a supply constraint that's not going away anytime soon.
He said Micron's results showed stronger cycle durability, supported by agreements with 16 customers that provide multi-year visibility into supply, pricing, and units. Memory now accounts for about 35% to 40% of cloud capital spending, and the supply-demand imbalance could last at least through the end of next year.
AI infrastructure deployment should continue through the end of the decade, Arya added, though growth may not remain at 60% to 70% annually. And despite the rally, he noted that Micron remains inexpensive, trading at less than 10 times forward earnings. In fact, Nvidia (NVDA), Broadcom (AVGO), and Micron all trade below the S&P 500 multiple.
Friday's pullback doesn't change the long-term uptrend. Micron trades 12.8% above its 20-day simple moving average, 46.6% above its 50-day SMA, and a whopping 174.7% above its 200-day SMA. Those large gaps suggest the stock is extended after a powerful rally and could see additional short-term volatility if buyers fail to defend key support levels.
Momentum indicators remain constructive. The MACD stays above its signal line, indicating bullish momentum is still intact even as the stock retraces from recent highs.
Micron recently hit a 52-week high of $1,255 in June after rebounding sharply from its April low. So far, the latest decline looks like a normal pullback rather than a reversal of the broader uptrend. Key resistance is $1,255, while the nearest support is the 20-day SMA at $1,024.97.
The stock carries a Buy consensus rating from 50 analysts, with an average price target of $1,477.17. Recent analyst actions include:
Micron trades at roughly 27.4 times forward earnings, reflecting expectations for continued AI-driven growth.
Micron continues to score highly on key metrics. Its Momentum score stands at 99.73, while Quality is 98.30 and Growth is 85.18. The Value score is 15.94, indicating investors are paying a premium for the company's growth prospects. The combination suggests Micron remains a strong momentum stock, but elevated expectations could make the shares more sensitive to market pullbacks.
Micron is a major holding in several semiconductor-focused ETFs, which can amplify price moves:
Large inflows or outflows in these funds can create additional buying or selling pressure on Micron shares.
Micron Technology shares were down 5.24% at $1,150.00 during premarket trading on Friday, according to market data.
Image via Shutterstock
Real-time alerts on price moves, news, and trading opportunities.
Join 20,000+ investors. No spam, ever.
