Trade Alert: 06.19.18 - Game Plan for Micron & The Semiconductor Space

Game Plan for Micron & The Semiconductor Space

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Micron reports after the bell tomorrow. With an uptick in price on heavy volume ON A DAY where trade tariffs are being threatened on the $120 BILLION trade surplus of U.S. semiconductor industry with China (WTF? I thought trade surpluses were GOOD for America? What AM I missing?) and 50 ish RSI (in other words NOT overbought as it was last time around (where we earned a HUGE score on our expiring $62 Call Option sale and $58 put option purchase) I dont see a need for anything fancy here.
 

The Feb Quarter financials were, needless to say, stunning. 

Quarterly financials

(USD)Feb 2018Y/Y

Revenue                    7.35B      58.15%

Net income               3.31B      270.13%

Diluted EPS               2.67       246.75%

Net profit margin      45.01%  134.06%

Operating income     3.57B    241.67%

Net change in cash    1.81B     -

Cash on hand             7.83B    115.47%

Cost of revenue         3.08B    4.65%

 And of course, Micron guided HIGHER in late May and has NOT changed its position. 

Action to take:  SELL a June 22 $56 Put Contract to HOPEFULLY Add the Third Tranche to our two previous investments in Micron on a pullback.

Buy Under $60 with $85 Target. With the option premium already earned and our 400% Put option gain from February, our overall return on our two Micron investments is getting to astronomical returns.

I agree with J.P Morgan's Harlan Sur--our new target is $85 or 45% MORE upside from here. Buy
J.P. Morgan reiterates its Overweight rating on Micron (NASDAQ:MU) and recommends buying into earnings into earnings on cloud computing potential.

  1. Analyst Harlan Sur cites the firm’s recent CIO survey, which suggested cloud computing workloads will quadruple in the next five years. Sur notes that Micron said cloud computing capex would triple by 2021 due to hper-date center based AI market demand.
  2. Sur: “Longer term, the company’s increasing product (DRAM, NAND, NOR) and end-market diversification should dampen revenue/earnings volatility and also position the company to do well in markets (handset) that require multiple types of memory.”
  3. Micron will report Q3 earnings on Wednesday.
  4. Price target maintained at $82, a 41% upside to Friday’s close.


Patience + Prudence wins the day--look at AMD!!!

Toby

Tobin Smith