Micron Technology (MU) faces challenges in a downturn in the memory-chip industry, as its stock fell after the company reported its fiscal fourth-quarter profit and revenue. While the results exceeded estimates, the guidance provided a mixed outlook for the company.
In the quarter ending on August 31, Micron reported a 26% decrease in earnings compared to the previous year, with a 40% decrease in revenue. However, these results still managed to surpass expectations, which had been lowered beforehand. Micron reported a loss of $1.07 per share on sales of $4.01 billion, while analysts had predicted a loss of $1.15 per share on sales of $3.945 billion. In the same quarter of the previous year, Micron had earned $1.45 per share on sales of $6.44 billion.
Looking ahead to the current quarter ending in November, Micron projected an adjusted loss of $1.07 per share, the same as the August quarter, on revenue of $4.4 billion. Wall Street analysts had expected a loss of 88 cents per share on sales of $4.24 billion, representing a 4% increase from the previous year.
Raymond James analyst Srini Pajjuri commented on the situation, stating that “pricing is starting to inflect as aggressive production cuts across the industry are helping improve demand supply balance.” Pajjuri also added that he believes supply growth will remain subdued, inventories will normalize, and stable demand will lay the groundwork for a cyclical upturn that will likely begin in the fourth quarter of 2023.
However, Micron’s stock fell nearly 4% to 65.50 in early trading following the earnings report. Prior to the report, the stock had experienced a 36% increase in 2023, driven largely by the buzz surrounding artificial intelligence stocks.
Despite the challenges, Micron’s Chief Executive, Sanjay Mehrotra, expressed optimism about the company’s performance in the future. He stated, “Our 2023 performance positions us well as a market recovery takes shape in 2024, driven by increasing demand and disciplined supply.” Mehrotra also mentioned the potential for record industry revenue in 2025, particularly as artificial intelligence expands from data centers to the edge.
Micron primarily manufactures dynamic random-access memory (DRAM) and Nand chips. DRAM chips serve as the main memory in PCs, servers, and other devices, while Nand flash retains memory without power and provides long-term data storage.
Analysts anticipate that memory chip pricing will stabilize in fiscal 2024. However, Micron faces the challenge of the Chinese government’s plan to ban its memory chips from its computer network infrastructure.
Despite the challenges, the long-term demand for Nand chips integrated into hard disk drives in data centers may increase due to artificial intelligence workloads.
Overall, Micron holds a Composite Rating of 66 out of a possible 99, according to IBD Stock Check-up. The Composite Rating combines key fundamental and technical metrics to evaluate a stock’s strengths. The best growth stocks generally have a Composite Rating of 90 or higher.
As Micron continues to navigate the industry downturn and faces both challenges and opportunities, investors will be closely monitoring the company’s performance, particularly as it relates to the future demand for memory chips and its ability to adapt to changing market conditions.