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Here's The Catalyst That Could Drive 20% Upside In Micron

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Here's The Catalyst That Could Drive 20% Upside In Micron
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Micron Technology, Inc. (NASDAQ: MU)'s stock could move higher by as much as 20 percent due to one notable upcoming catalyst, analysts at Goldman Sachs argue. The firm's Mark Delaney upgrades Micron's stock rating from Neutral to Buy with a price target boosted from $33 to $40 ahead of the company's fourth-quarter earnings report which is scheduled for Sept.26.

During Micron's fourth-quarter earnings report, the company is expected to guide its fiscal first quarter 2018 earnings per share above consensus estimates due to strength in DRAM and other pricing issues, Delaney commented in his research report. In fact, the company could issue first quarter guidance that is 20 percent above what the Street is expecting and any full-year guidance could come in as much as 25 percent higher than currently expected.

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"Our industry discussions on NAND suggest pricing will be flat to up in 4Q on a like for like basis," the analyst explained. "Two contacts we spoke to suggested NAND (especially 2D NAND) is tracking higher into 4Q, while another said that while there was probably enough demand for 4Q prices to go up, it might make sense to hold pricing flat to help mitigate what could be pricing declines in 2018."

Meanwhile, the options market is "worried" about Micron's upcoming earnings report, the analyst continued. The options market is pricing in a move of 10 percent (in either direction), which is 2 percent more than the move shares typically realize over the past eight quarters. Also, the put-call skew is elevated not only in Micron but across the broader semiconductor complex. This implies that investors are "more worried about the industry and perhaps this fear is lifting the skew on MU."

Accordingly, investors should consider buying the Sept. 29, 2017, $34.50 calls for $1.49 each.

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Latest Ratings for MU

DateFirmActionFromTo
Dec 2018KeyBancMaintainsOverweightOverweight
Nov 2018CitigroupMaintainsNeutralNeutral
Nov 2018UBSMaintainsNeutralNeutral

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