Micron Technology, Inc. (NASDAQ:MU) — Shares of MU stock are up nearly 12% so far this week after a new shareholder rights plan filed by the maker of DRAM and NAND flash memory and image sensors was said to increase the likelihood of a takeover. Credit Suisse pointed to China and Intel Corporation (NASDAQ:INTC) as possible suitors, estimating a strategic investment will value MU stock at $17 to $22 per share, and saying it “would be positive for the stock.”
Zacks notes that earnings for major semiconductor companies have been mixed this quarter, but Micron Technology beat when it reported its most recent quarterly results on May 30. The adjusted loss per share (excluding one-time items) was 8 cents versus a Zacks consensus estimate for a loss of 11 cents.
The consensus estimate is for a loss of 7 cents per share this fiscal year, which ends on Aug. 31, but for the company to turn a profit of 51 cents in fiscal 2017.
Technically, MU stock broke from a downtrend that began in December 2014 at over $35 by establishing a double-bottom in January and May of this year at under $9. On Monday, shares broke from a consolidation that followed the bottom, gapping from $13.23 to $13.88 and setting a new high for the year. The breakaway gap followed a bullish “W” formation that was supported by higher-than-average volume.
The first support on a pullback is at the 200-day moving average at $12.75, and then the 50-day moving average at $12.45. The chart shows many strong technical indicators including a pending golden cross, a long-term buy signal in which the 50-day moving average moves up through the 200-day.
Traders should look to buy MU stock under $15 with a target of $18 for a potential gain of at least 20%.