Micron’s earnings forecast disappoint amid concerns over memory chip prices and falling stocks

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Micron Technology Inc. offered a financial forecast well below those expected by analysts on Tuesday amid expected drops in the price of pandemic-influenced memory chips, pushing stocks lower late in the session.

Micron UM,
-2.77%
Tuesday reported earnings of $ 2.72 billion, or $ 2.39 per share, on revenue of $ 8.27 billion, up from $ 6.06 billion a year ago. After adjusting for stock-based compensation and other effects, the company reported earnings of $ 2.42 per share, more than double the $ 1.08 per share last year. That performance easily beat analysts’ average estimate for expected adjusted earnings of $ 2.33 per share on sales of $ 8.23 ​​billion, according to FactSet.

Micron’s budget forecast for the first quarter, however, did not exceed analysts’ expectations. The chipmaker is forecasting adjusted earnings of $ 2 to $ 2.20 per share on sales of $ 7.45 billion to $ 7.85 billion. Analysts on average expected adjusted first-quarter earnings of $ 2.53 per share on revenue of $ 8.54 billion, according to FactSet.

Micron shares fell more than 4% in after-hours trading immediately after the results were announced on Tuesday, after closing with a decline of 2.8% to $ 73.10.

Micron has benefited from a surge in memory chip prices amid the COVID-19 pandemic, as evidenced by its results for the entire year. Annual sales jumped to $ 27.71 billion from $ 21.44 billion the previous year, while GAAP profit more than doubled to $ 5.86 billion from $ 2.69 billion the last year.

But analysts and experts believe the party is coming to an end, especially for DRAM, or dynamic random access memory, commonly found in personal computers and larger devices such as servers. As the boom in PC sales slows, analysts believe that price increases seen in the market for more than a year are also on the decline.

“We still believe that demand outside the PC remains healthy, and we don’t believe the DRAM industry has built up oversupply, which is the most important factor in maintaining a bullish outlook,” wrote the Raymond James analysts in a Monday morning snapshot, dropping their target for the stock price to $ 100 from $ 120, but retaining a “strong buy” rating. “Having said that, we have seen the first signs of an increase in capacity spending, and if that persists it would force us to become more cautious.”

Raymond James was not the only store to lower its price target for the Micron stock – at least 10 analysts lowered their target price for the stock this month, according to FactSet, bringing the average down to more than 120 $ end of July to less than $ 110, $ 109.57, Tuesday.

However, Micron’s results and advice may not be the most important factors to watch out for.

“The real question, in our opinion, has little to do with Micron’s results and forecasts, and rather concerns whether the expected drop in the price of memory in the fourth quarter (especially for DRAM) is the start of a cyclical slowdown or rather a short-lived phenomenon. related to inventory adjustments, ”wrote Wedbush analyst Matt Bryson, who has a neutral rating and a target price of $ 105 on the stock last week. “We continue to believe this latter view pattern is more likely, but stay away from earnings as we look for other data points to confirm our bias.”

Micron executives are expected to provide some color on their memory pricing expectations during a conference call scheduled for 5:30 p.m. EST on Monday.

Micron stock has fallen 12.3% in the past three months as concerns over the price of memory have spread throughout the industry but are still up 47% in the past year. because the S&P 500 SPX index,
-2.04%
increased by 3.6% and 32.6% during these same periods.


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