A Time-Sensitive Techno-Trade

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One of Eric Fry’s favorite semiconductor stocks appears poised to leg higher. Here are the trade details


***We begin today’s Digest with a reminder to join us tomorrow at 4 p.m. ET for a special, live event with Matt McCall and colleague, Keith Kaplan

 

Matt and Keith will be discussing what they call, a “revolutionary” tool that can help investors get in front of major market moves.

The tool has been dead-on accurate about this recent market — as well as every major bear market and bull market going back roughly 20 years.

At the event tomorrow, Matt and Keith will be showing how thousands of ordinary folks leverage this market-timing tool with great success.

Just click here to reserve your seat.


***On April 30th, we piggybacked on one of Louis Navellier’s picks, suggesting a trade on PennyMac Financial Services

 

Digest readers who made the trade are sitting on 30% returns as I write.

Today, let’s put another trade on your radar. For this one, we’ll piggyback on global macro specialist, Eric Fry.

The company we’ll discuss reports earnings in one week. And according to Eric, it’s “likely to report blowout numbers” which should lift the stock over the coming quarters.

But “coming quarters” could be just the beginning — the potential long-term gains of this stock are triple-digit.

That’s because, according to Eric, “its offerings are essential to powering several of the current technological megatrends that are transforming American life.” Regular Digest readers recognize that this means the company is on the right side of the Technochasm.

So, today, let’s make the case for a tech-trade on Micron Technology (MU).


***The “under the radar” tech stock about to report earnings

 

First, for any newer Digest readers, let’s establish some context so we’re all on the same page.

Eric is the analyst behind Fry’s Investment Report. He’s also a veteran investor with decades of experience and one of the most impressive long-term track-records in the investment newsletter industry.

In recent months, Eric has been studying and writing about a phenomenon he’s named the “Technochasm.”

The term references the widening wealth gap that’s taking place thanks in large part to huge investment gains coming from select, technology investments.

Cutting-edge tech products are simplifying our lives, making them far more convenient. This is why Americans are happy to open their wallets for tech — and this means most Americans, even those who aren’t necessarily earning high incomes.

Yet, this is a major wealth transfer — from the masses … to a select group of technology business owners, key employees, and investors …

It’s creating a sharp wealth divide — in the socioeconomics of our society, as well as in the stock market.

Investors who align their portfolios with the Technochasm will see far greater gains over this decade than investors who remain invested in “old school” companies.

Given this, it comes as little surprise that Eric’s recent find is a tech stock — in this case, Micron Technologies, a semiconductor company.

For any Digest readers less familiar with semiconductor companies, they make integrated circuits for all sorts of electronic devices. They’re a critical component in the majority of tech products we love and use every day, including our laptops, cell phones, and countless other electronic devices. This makes them a darling of the Technochasm.

Here’s Eric with more on Micron:

This semiconductor developer doesn’t have the flashiest products when it comes to work-from-home trends. But its offerings are essential to powering several of the current technological megatrends that are transforming American life …

Back in March, I urged subscribers to my elite trading service, The Speculator, to get long Micron via a high-octane options play.

At the time, while the market was still panicking, I pointed out the silver lining for Micron: “The coronavirus could help boost semiconductor demand. Almost every commercial or recreational activity that eliminates or reduces human interaction relies on semiconductors.”

And in fact, this is precisely what has played out.

So far, those options are up more than 62% … and “shelter in place” sectors like video games and online video conferencing have been among the market’s biggest gainers. As the market has woken up to the economic effects of the virus, stocks like video game developer Activision Blizzard (ATVI), which I told you about here on April 25, have soared.

And in order to power all that increased computing, you need more chips and more memory. That’s where Micron comes into the picture.


***Why next week’s earnings report could be the catalyst sending Micron even higher

 

The thinking behind this trade is simple …

A document filed last month reveals that demand for Micron’s products has soared … and Eric expect to see this demand manifested in Micron’s numbers next week.

Here’s Eric, with more:

Late last month … the company filed a regulatory document that provided investors with updated guidance. And the numbers were sizzling.

Micron raised its expected revenue for the quarter from a range of $4.6 billion-$5.2 billion to a new range of $5.2 billion-$5.4 billion. In other words, the old top-end estimate became the new bottom-end estimate.

And if we were to use the midpoints of these two forecasts, the company boosted its revenue guidance by $400 million, up from $4.9 billion to $5.3 billion.

Eric goes on to note that Micron expects more than half of this revenue boost to drop down to its bottom line and increase non-GAAP earnings by about $250 million more than it had forecast previously.

As to how this would translate into earnings-per-share, Micron’s prior guidance called for the current quarter’s EPS to come in around $0.55. The updated guidance anticipates a jump to at least $0.75.

Here’s Eric with the takeaway:

If Micron sees this sort of demand continue through the full year, a $0.20-per-share quarterly boost would cause a massive lift in forward earnings expectations …

This is exactly the type of catalyst that should power Micron up to those $60-$75 price targets.

As I write, Micron trades at $50.65 a share. A rise to a $60-$75 price range means a gain of 18%-48%.


***Remember the long-term growth story too

 

It was back in April that Eric was eyeing the semiconductor sector, seeing two big catalysts for longer-term growth.

From Eric:

Chip Trigger No. 1: Near term, of course, the coronavirus epidemic is depressing demand. But long term, many companies might attempt to counteract the operational risks of the next global pandemic by shifting more of their processes to machines of some sort, rather than human beings.

Almost every commercial product or recreational activity that eliminates or reduces human interaction relies on semiconductors and transistors.

 

As to the second trigger, Eric pointed toward Apple and its debut of its new 5G-native iPhone this fall.

He noted this alone isn’t bullish for the chip sector, but it shows that 5G is becoming more and more a part of our daily lives. And once 5G goes widespread, we’ll all upgrade our smartphones, laptops, modems, smart TVs, and plenty more personal tech devices, which will be a massive boost to the semiconductor industry.

If we look even further out, Eric noted that by 2035, 5G will enable $1.3 trillion to $1.9 trillion worth of economic output in the United States alone — and a big chunk of that will go toward chips.

It was on April 2nd that Eric pointed toward Micron as one of his favorite ways to play semiconductors to his Smart Money readers. Since then, the stock is up 27%.

But if next Monday turns into the earnings blowout Eric is expecting, expect even more gains to come.

Micron is just one tech company poised to do well in coming years. For more of Eric’s preferred ways to align yourself with the Technochasm, click here.

Have a good evening,

Jeff Remsburg


Article printed from InvestorPlace Media, https://investorplace.com/2020/06/a-time-sensitive-techno-trade/.

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