The Roundhill Memory ETF (DRAM) heads into the week with a big catalyst ahead: Micron’s earnings. Micron is the fund’s largest holding, and the report should show whether growth across the memory industry is holding up.
DRAM closed last week at $61.91, more than double its all-time low but about 24% below its all-time high of $81.34. It has held a narrow range since August, and investors have pulled roughly $2.1 billion from the fund over the past month.
DRAM outflows | Source: ETF Db
DRAM ETF in spotlight ahead of Solidigm IPO
One of the top stories that will drive the DRAM ETF is from South Korea, where SK Hynix, its third-biggest constituent, is planning a major IPO for its subsidiary. SK Hynix is considering a US IPO of Solidigm, which will value it at $100 billion.
There are signs that investors are not cheerful about the deal, with the stock falling by over 5%. SK Square, which is a big investor in SK Hynix, dropped by over 8%.
The decline was likely because investors are concerned about its complex ownership. In a statement, the Korea Corporate Governance Forum, the listing would add to the multiple layers of ownership within the group. It would also deepen the pyramid structure. An analyst told Bloomberg:
“A US listing could unlock Solidigm’s value and fund expansion, but SK Hynix shareholders would be giving up a portion of its future earnings. The key is the valuation and the use of proceeds.”
SK Hynix’s slide will likely have an impact on DRAM when the US markets open later today. To make matters worse, Samsung Electronics stock was also down by over 4% on Monday. Together with Micron, these three companies make up of over 75% of the total fund.
Micron earnings to show strong growth
The other key catalyst for the DRAM ETF is the upcoming Micron earnings, which are scheduled to happen later this week. These earnings are used as a bellwether on the memory and the AI industries since the company sells its products to some of the biggest players in the industry.
Estimates are that Micron’s revenue soared last quarter. Precisely, the average estimate among analysts is that its revenue soared by over 320% to $51 billion. In reality, the figure will likely be much higher than that.
Most importantly, Micron has become one of the top players in terms of margins. The management provided a gross margin guidance of 86%, meaning that the real figure will be close to 90%. In contrast, Nvidia has a gross margin of 75%.
These earnings come at a time when Micron is trading at a bargain, with its forward price-to-earnings ratio of 14 being lower than the sector median of 20. Micron’s earnings are important because it is the biggest constituent in DRAM.
DRAM ETF technical analysis
DRAM ETF chart | Source: TradingView
The four-hour chart shows that the DRAM ETF has remained inside a narrow range in the past few months. This consolidation has coincided with the ongoing outflows as investors start booking profits.
The ETF is trading between the middle and the upper side of the Bollinger Bands. Also, the two lines of the Percentage Price Oscillator (PPO) have formed a bearish crossover. Therefore, there is a risk that the fund will drop to $53, the lower side of the PPO. In the future, however, the fund will rebound and possibly move to $65.
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