Micron chip company
MICRON TECHNOLOGY
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published near the end of last month its results for the second fiscal quarter of 2023 which ended at the end of February. The company’s revenues were $3.69 billion, a 53% drop compared to the corresponding quarter, and the company warned that a 57% drop could be recorded in the next quarter.
Micron recorded an adjusted loss per share of $1.91, well beyond analysts’ expectations for an adjusted loss of $0.6 per share. Despite everything, the stock took off after the publication of the reports due to the company’s expectation that by the middle of this year the results would improve. Since the publication of the reports, the company’s stock has managed to fall further, but negative publicity from the competitor Samsung actually encourages investors today.
On Friday, Samsung published an outlook for the reports of the first quarter of 2023 and the situation does not look good at all – the company expects the company’s profit to be cut by 96% compared to the corresponding quarter to 450 million dollars. Following the expected drop, Samsung announced that it would cut the production of its memory chips “at a significant level”. According to Deutsche Bank, the company is expected to mainly cut the production of DRAM chips while the production of NAND chips will not be affected.
The reason for the surge in Micron’s stock today is due to the fact that close to three quarters of the company’s revenue in the last quarter came from sales of DRAM chips, while only a quarter came from NAND chips. This means that Micron can now increase its market share in the most significant product for it.
It is important to emphasize that the cut in production by Samsung is not “just” – there is a reason that such a large company decides on such an important step. The demand for chips has been in decline for some time after a serious shortage due to Corona caused many suppliers to overfill their inventories. Yesterday evening the giant TSMC published
TAIWAN SEMICOND MNFCG CO
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its sales report for the month of March and presented a 15% decrease in revenue, for the first time in 4 years.
When two of the largest players in the chip market are showing such negative data, it may be that Micron’s optimistic forecasts, which sent the stock soaring after the reports, may be too optimistic. The company is now trading at a multiple of 42 and the market slowdown may last for a while – the stock may still be expensive.
Micron trades at a market cap of $69 billion with a dividend yield of 0.8%. In the last quarter the company presented a negative free cash flow of 1.86 billion dollars while in the corresponding quarter the company recorded a positive flow of 1.02 billion dollars.
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