Micron Technology (MU), a supplier of DDR4/DDR5 memory for computers, reported a weak outlook.
This sent MU stock down by ~5% after the report. The warning is bad news for the semiconductor
sector.
Micron posted earnings of $2.59 a share on $8.64 billion in revenue. In the fourth quarter, it expects
revenue of $6.8 billion - $7.6 billion. EPS is in the range of $1.43 to $1.83. Analysts are off the mark. They
expected Micron would post revenue of $9.05 billion and an EPS of $2.62.
Speculators previously thought that a chip shortage would lift Micron’s profits. The outlook suggests the
down cycle is now in play. Still, Micron is profitable during a down cycle. It will sustain its average selling
price, which will help profit margins.
To take advantage of the stock drop, Micron will buy back shares.
Micron managed its inventories well. It also limited its capital expenditure. Fortunately, the capacity
constraints resulted in a lower inventory build-up. When the economy improves, demand for server
upgrades will rebound. Micron positioned its business to take advantage of a demand recovery in the
fiscal year of 2023.
Investors are short-term thinkers. Micron’s weak outlook will hurt technology stocks. The downside is
limited from here. Look for selling pressure to end before building a position.
