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 newsflow 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 +/-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 writes.
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,” he writes.
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.
