Micron Technology Inc. shares fell Wednesday as analysts digested the chip maker’s conservative outlook as it faces a loss of sales to one of its largest customers and a drop in memory chip pricing.
Micron MU, -4.37% shares fell more than 5% in Wednesday trading, hitting an intraday low of $47.35.
While the Boise, Idaho-based chip maker topped Wall Street estimates for the quarter, its outlook left much to be desired, calling for fiscal first-quarter earnings of 40 cents to 54 cents when analysts were estimating, on average, 66 cents a share. The average estimate declined to 49 cents a share by Wednesday morning, according to FactSet data. Then again, a conservative outlook had been widely expected from Micron.
The current quarter will be the first under the Trump administration sales ban of U.S. chips to Chinese telecommunications-equipment company Huawei, which made up 10% of Micron’s fourth-quarter sales.
Micron sells DRAM, or dynamic random access memory, the type of memory commonly used in PCs and servers, and NAND chips, which are the flash memory chips used in USB drives and smaller devices, such as digital cameras.
Citi Research analyst Christopher Danley reiterated his sell rating as Micron’s outlook supported a drop in DRAM prices.
“However, we could become more positive on MU if we see a sustainable upturn in DRAM and the company lowers inventory,” Danley said.
Cowen analyst Karl Ackerman, who has an outperform rating on the stock, said Micron’s outlook confirmed an expected trough in memory sales for the February-ending, or fiscal second, quarter.
“A guide down was well-telegraphed, but a confluence of near-term factors such as the Huawei ban, higher DRAM production costs, front-half loaded capex and lackluster demand will hurt [gross margin] and [free cash flow] capability,” Ackerman said.
Mizuho analyst Vijay Rakesh, who has a buy rating on the stock, said even with the headwinds, auto-based and handset sales along with continued strength in data-center sales “should drive 2021 cyclical recovery.”
Raymond James analyst Chris Caso, who has a strong buy rating, said Micron has prepped investors well for the lower outlook at events over the quarter, so Tuesday evening’s forecast should not be a “significant surprise.”
“Near term weakness is a function of customer inventory, Huawei restrictions, and some elements of COVID-related weakness, all of which are transitory by nature,” Caso said.
Of the 33 analysts who cover Micron, 25 have buy or overweight ratings, seven have hold ratings and one has sell rating. Of those, 10 lowered their price targets on the stock and two raised theirs, resulting in an average target price of $62.80, down from a previous average of $63.80, according to FactSet data.
Micron shares are down 10% for the year, versus a 22% increase on the PHLX Semiconductor Index SOX, +1.00%, a 4% rise on the S&P 500 index SPX, +1.15% and a 25% rise on the tech-heavy Nasdaq Composite Index COMP, +1.29%.
