Options Bulls Circle as Analysts Cut Micron Price Targets

The attention comes ahead of Micron's upcoming earnings report

Micron Technology, Inc. (NASDAQ:MU) is trading down 3.4% today at $33, after J.P. Morgan Securities slashed its price target on the chip stock to $50 from $64. The brokerage firm said it will take the company "some time to normalize" after the U.S. blacklisting of Chinese telecom Huawei, and expressed concern over tough memory chip pricing.

J.P. Morgan Securities also lowered its full-year profit forecast for Micron ahead of the chipmaker's Tuesday evening event, a sentiment echoed in a bearish note from Baird. The latter firm lowered its 2019 forecast for MU, too, and cutting its price target on the stock to $28 from $32.

The stock's negative reaction to this bearish brokerage attention just echoes its recent trajectory. In fact, since a late-April rejection near $44 -- a stiff ceiling for MU in 2019 -- the shares are down more than 25%. And while they've found a floor just above their year-to-date breakeven level of $31.74, the 30-day moving average appears to be emerging as potential resistance.

History doesn't provide many clues on how Micron stock may react to earnings in next Wednesday's trading. The security has closed higher the day after earnings in four of the last eight quarters, including a 9.6% pop in March. This is about in line with what the options market is pricing in for this time around, regardless of direction.

Today's options traders appear to be betting on a post-earnings pop. Amid accelerated call volume -- the 65,000 contracts traded so far is 1.4 times the average intraday amount -- the July 35 strike is most active. It looks as if new positions are being purchased here for a volume-weighted average price of $1.26, which would make breakeven for the call buyers $36.26 (strike plus premium paid).