MU stock: Micron misses quarterly targets

Memory stick maker micron technology (mo) missed Wall Street’s lower forecasts for the fiscal second quarter as it struggles through a cyclical downturn in the industry. Still, MU stock rose on Wednesday on hopes that the worst might be over for Micron.

X

The Boise, Idaho-based company said late Tuesday that it lost an adjusted $1.91 per share on sales of $3.69 billion for the quarter ending March 2. Analysts polled by FactSet expected Micron to lose 67 cents a share on sales of $3.71 billion. In the year-ago period, Micron earned $2.14 a share on sales of $7.79 billion.

Micron took a $1.43 billion inventory writedown in the second quarter. This had a negative impact on earnings of $1.34 per share.

For the current quarter, Micron expected an adjusted loss of $1.58 per share on revenue of $3.7 billion. Wall Street had expected a loss of 96 cents per share on sales of $3.72 billion for the fiscal third quarter. In the year-ago period, Micron earned $2.59 a share on sales of $8.64 billion.

Micron’s guidance includes an inventory writedown of approximately $500 million. That would negatively affect earnings by about 45 cents per share.

MU stock rises in expectations

In today’s stock market morning trade, MU stock jumped 6.4% to 63.04. During the regular session on Tuesday, MU stock fell by 0.9%, closing at 59.28.

In written comments, Micron CEO Sanjay Mehrotra said he sees a “gradual improvement in the supply-demand balance in the coming months.” He said customer inventory has declined in many end markets, including data centers.

However, Mehrotra said that the memory chip sector still faces “significant challenges in the near term”.

“The semiconductor memory and storage industry is facing its worst downturn in the past 13 years, with an exceptionally weak pricing environment significantly impacting our financial performance,” he said.

The long-term outlook is bright, Mehrotra said, with investments in artificial intelligence providing another driver of demand for memory chips.

Micron’s ‘So Bad It’s Good’ Report

At least six Wall Street analysts raised their price targets on MU stock after the quarterly report.

Evercore ISI analyst CJ Muse said Micron’s report was “so bad it’s good”. He said that’s because the company’s lower-than-expected guidance indicates a potential bottom. Muse rates MU stock as Outperform, or Buy, with a price target of 75.

JPMorgan analyst Harlan Suhr reiterated his overweight, or buy, assessment of MU stock and raised the price target to 75 from 65.

“With the company managing one of the worst downturns in memory, the team is beginning to see some light at the end of the tunnel with inventory levels consistently improving across a broad range of end markets,” Sore said in a note to clients.

The speed of recovery is uncertain

However, other analysts were cautious about Micron’s prospects.

Piper Sandler analyst Harsh Kumar kept his under or sell rating on MU stock.

“Micron is still experiencing overstocking at this time, and although there appears to be a glimmer of hope in the near future, we remain cautious,” Kumar said in a note to clients.

Sidney Hu, an analyst at Deutsche Bank, said the bottom of the memory chip market may have been reached, but the pace of recovery was uncertain.

“The depth of the downturn now appears to be deeper compared to the previous administration’s expectations, and with a slower pace of recovery in the second half of fiscal 2023,” Hu said in a note to clients. He rates MU stock as a contract with a price target of $55.

MU stock received an underperforming Composite rating

Micron makes two main types of memory chips: DRAM and Nand. DRAM chips serve as main memory in computers, servers, and other devices, and work closely with CPUs. Nand flash provides long term data storage.

Dynamic Random Access Memory, or DRAM, accounted for 74% of Micron’s revenue in the fiscal second quarter. Nand flash memory accounted for 24% of its revenue over the period.

MU stock ranks third out of 10 stocks in IBD’s computer data storage industry group, according to IBD stock check. But he has a substandard IBD composite rating of 42 out of 99.

The IBD Composite Rating is a combination of key fundamental and technical measures to help investors gauge a stock’s strength. The best growth stocks have a composite rating of 90 or better.

Follow Patrick Seitz on Twitter at @employee For more stories on consumer technologies, software and semiconductor stocks.

You may also like:

The analyst says Apple’s advertising business is under-appreciated

This top cyber security stock is getting close to a point of purchase

Was AMD Stock Bought Before Chipmaker’s March Quarter Report?

See stocks in the list of leaders near a buy point

Find winning stocks using MarketSmith’s pattern recognition system and custom screens