Markets
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Luke Kawa

JPMorgan recommends bullish options bet on Micron ahead of earnings

JPMorgan equity derivatives strategists led by Bram Kaplan think Micron is poised to jump after it reports earnings on Tuesday after the close — but not by too too much.

Micron has had an exceptionally hot run lately. Before Friday’s drop, shares of the memory chip specialist enjoyed a record-winning streak buoyed by a bevy of positive news on AI data center spending.

Kaplan says options that encompass the reaction to Micron’s earnings look expensive, as they currently imply a move of plus or minus 9.6% versus an average absolute change of 7.4% over the past three years. And with such an explosive advance over the past few weeks, he reckons the odds of an outsized surge on earnings are not high.

“The company’s pre-announcement should partially de-risk the earnings print, which, along with our analyst’s $185 price target (~14% upside), gives us comfort selling deep upside, leading us to favor call ratios to position into earnings,” he wrote.

JPMorgan’s recommendation:

  • Buy one call option on Micron that expires this Friday with a strike price of $170, and

  • Sell two call options on Micron that expire this Friday with a strike price of $180.

This trade doesn’t cost anything in terms of premium; you actually get paid for putting it on. The potential downside is that significant losses could result in the event the stock goes parabolic this week.

The sell side anticipates that Micron will deliver adjusted diluted earnings per share of $2.84 on sales of $11.15 billion and adjusted gross margins of 44.5% in its fiscal fourth-quarter results on Tuesday, per analysts surveyed by Bloomberg.

JPM’s semiconductor analysts think that earnings and margins will exceed expectations, and guidance for the current quarter will also surprise to the upside. Commentary around margins, supply commitments, and the balance of supply and demand for high-bandwidth memory chips next year will likely be the key factors that drive the stock amid the release of earnings and the quarterly conference call, in their view.

“Given materially higher high bandwidth memory content for XPUs/GPUs shipped in calendar year 2026 vs. calendar year 2025, and likely upside to current XPU/GPU unit growth expectations for CY26 against a backdrop of rising hyperscaler capex budgets, our analysts see little risk of oversupply next year,” Kaplan wrote.

Kaplan’s got a hot hand when it comes to trade calls on semiconductor earnings: in early September, his bullish options recommendation on Broadcom ahead of its quarterly report delivered a return in excess of 450% after the AI chip designer unveiled a major new customer later reported to be OpenAI.

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Tasha Matsumoto
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Stocks eke out gains on hopes for a path forward for reopening the Strait of Hormuz

Stocks rebounded on news that Iran is drafting a protocol with Oman to “monitor transit” through the crucial Strait of Hormuz.

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Matt Phillips

AI server cluster maker Penguin Solutions takes flight

Small-cap AI server cluster maker Penguin Solutions surged Thursday after posting better-than-expected Q2 revenue and profit numbers Wednesday after the close, along with an increase in full-year sales and profit guidance.

The company, which was known as Smart Global Holdings until July 2024, has positioned itself as a provider of “end-to-end AI infrastructure solutions.”

Its Advanced Computing division designs and sells computers, cabling, and cooling systems, the server racks and clusters of racks AI data centers need. Its other main division sells flash and DRAM memory products.

It’s a pretty small company, with a fully diluted market cap of just over $1 billion and roughly 2,900 employees, according to FactSet.

The stock is volatile. Penguin dove during last year’s tariff tantrum that followed “Liberation Day” in April. Then it turned tail and doubled through early October amid a surge of call options activity, which tends to reflect retail interest. From the October peak, it then plunged by about 50%, before Thursday’s renaissance.

For what it’s worth, call options activity in Penguin is pretty busy today, too — relatively speaking — with roughly 2,625 traded as of 1:15 p.m. ET. That’s the most since early January, when the company last reported quarterly numbers. The average volume over the previous 25 trading sessions is about 325 calls a day, FactSet data shows.

Penguin Solutions Stock Takes Off On AI Bolstered Outlook

Penguin Solutions Stock Takes Off On AI Bolstered Outlook

The company, which was known as Smart Global Holdings until July 2024, has positioned itself as a provider of “end-to-end AI infrastructure solutions.”

Its Advanced Computing division designs and sells computers, cabling, and cooling systems, the server racks and clusters of racks AI data centers need. Its other main division sells flash and DRAM memory products.

It’s a pretty small company, with a fully diluted market cap of just over $1 billion and roughly 2,900 employees, according to FactSet.

The stock is volatile. Penguin dove during last year’s tariff tantrum that followed “Liberation Day” in April. Then it turned tail and doubled through early October amid a surge of call options activity, which tends to reflect retail interest. From the October peak, it then plunged by about 50%, before Thursday’s renaissance.

For what it’s worth, call options activity in Penguin is pretty busy today, too — relatively speaking — with roughly 2,625 traded as of 1:15 p.m. ET. That’s the most since early January, when the company last reported quarterly numbers. The average volume over the previous 25 trading sessions is about 325 calls a day, FactSet data shows.

markets
Luke Kawa

Momentum returns to optics stocks as the release valve for AI optimism

Potentially imminent end to the war? Buy optics stocks.

Maybe not? Buy optics stocks anyway.

Effectively all the juice left in the AI trade is coming from optics (and memory) stocks. And the latter group is taking a bit of a breather today while the former continues to surge.

Shares of Ciena Corp., Lumentum, and Coherent are building on recent big gains and among the biggest gainers in the S&P 500 near midday, while Applied Optoelectronics is also surging on Thursday.

These companies all provide solutions that help information move around in data centers, and thus are key beneficiaries of the aggressive capex plans of hyperscalers. Nvidia has invested $2 billion apiece in Coherent and Lumentum in deals that also include purchase commitments.

markets
Matt Phillips

Space stocks rip during a topsy-turvy day for the equity market

Satellite-services-from-space stocks surged Thursday after reports that Amazon is in talks to buy Globalstar, which provides voice and connectivity services from its satellite network. It also can’t hurt that the general mood around space is ebullient, following the successful launch of Artemis II on Thursday.

Planet Labs and ViaSat also soared on the news.

The gains for EchoStar — seen as a backdoor play at pre-IPO SpaceX exposure — and Rocket Lab were more muted, perhaps because a deep-pocketed competitor like Jeff Bezos getting serious about space services could complicate the plans of the two largest commercial space launch companies.

Rocket Lab and SpaceX see launch services as key to their aspirations of being major providers of voice and data services from low-Earth orbit satellites.

Tesla CEO Elon Musk’s SpaceX is the dominant provider of such services, and the early rumors on the company’s planned IPO — expected to be the largest ever — suggest the market is very excited about the prospects for the industry.

Elsewhere in the space stock world, Intuitive Machines — a maker of space infrastructure that provides services to NASA for lunar missions — also rose.

Globalstar surges after FT reports that Amazon is in talks to buy the satellite group

Globalstar surges after FT reports that Amazon is in talks to buy the satellite group

The gains for EchoStar — seen as a backdoor play at pre-IPO SpaceX exposure — and Rocket Lab were more muted, perhaps because a deep-pocketed competitor like Jeff Bezos getting serious about space services could complicate the plans of the two largest commercial space launch companies.

Rocket Lab and SpaceX see launch services as key to their aspirations of being major providers of voice and data services from low-Earth orbit satellites.

Tesla CEO Elon Musk’s SpaceX is the dominant provider of such services, and the early rumors on the company’s planned IPO — expected to be the largest ever — suggest the market is very excited about the prospects for the industry.

Elsewhere in the space stock world, Intuitive Machines — a maker of space infrastructure that provides services to NASA for lunar missions — also rose.

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Can Sandisk do the double?
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The S&P 500 just had its worst quarter in years. Here are the biggest winners and losers.

Sandisk and energy stocks soared while software names sank amid a broad sell-off in tech stocks.

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