Micron and Nike At Opposite End of Spectrum

The two premier stocks to report this week could show the contrast between the rise in tech and the fall of retail, as AI remains enough of a powerhouse to offset a gloomy market outlook.

Micron to Turn the Corner?

Last quarter, Micron's CEO was confident that his industry had the bottom of the oversupply. The upcoming earnings report is the opportunity to see if he was right, as analysts are optimistic that increasing demand for AI could also support the company's earnings. But that doesn't mean that compared to last year, things will be hugely better. The consensus is for a slight increase in sales to $3.9B from $3.6B last quarter, but substantially lower than the $6.7B reported in the same period of last year. Earnings are expected to follow a similar pattern, rising to -$1.17 but well below the $1.45 of last year.

The focus, therefore, is on when the company will return to profit. For now, analysts don't believe it will be until the second half of their fiscal year. An improvement in the timeline, but raising guidance, could be the catalyst for sending the stock even higher. Despite losing money all year, the share price is over 40% as investors anticipate growth from increased demand for memory chips to fuel AI development. Micron is a key supplier to Nvidia, specifically for data-center memory chips needed for AI. But those gains could be tempered by a general computer and cellphone market slowdown as consumers face higher inflation.

Nike at Risk of Guidance Change

Speaking of consumers being more cautious about spending, Jefferies recently warned that major retailers could face a challenge starting in October. That's when US student loan repayments are due to restart, which could constrict spending on consumer goods, including Nike. That was why the rating agency cut its stock price outlook for the sport and footwear company. Although that is not likely to impact last quarter's earnings, it raises the prospect of a potential guidance downgrade, which could weigh on the stock.

Analysts expect Nike to report compression of its profit margin as it faces higher input costs and has difficulty raising prices. Earnings are forecast to improve quarterly to $0.76, while sales are seen ticking up to $13.0B. That implies earnings are falling despite rising revenue, with a focus on lacklustre demand in China. Guidance around their second largest market might be the key for investors since the company reported it was right-sizing its China division last quarter. That is if the company manages to work through its inventory.

Micron in Ascending Consolidation

The stock price of Micron appears to be forming an ascending triangle pattern as the higher-low swing of $62 was followed by a double-top at $72.50, raising the chances of an upward continuation towards the measured-move projection of $86 should the short-term support holds firm and the peak of $75 gives way to bullish action. Typically, the golden pocket completes the last wave of a triangle, settled near $66 in our case.

If the support breaks down, only losing $60 would imply a pattern invalidation, with the opening up of $53 increasing the probability of seeing a medium-term rising flag pending further upside or a larger-term falling flag. The latter case would imply additional pain under $47.

Source: SpreadEx / Micron Technology

Key Takeaways

Micron and Nike, two major companies in the tech and retail sectors, are set to release earnings reports this week, providing insight into the contrasting industries' performance. Analysts are optimistic about the increasing demand for AI technology, which could support Micron's earnings. On the other hand, Nike might face a potential guidance downgrade due to cautious consumer spending, particularly with the restart of student loan repayments, and lacklustre demand in China. Micron's stock price is displaying an ascending triangle pattern, indicating the possibility of further upward momentum. However, if support breaks down, it could invalidate the pattern and result in a potential decline.