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Memory chip titan Micron Technology Inc. (NASDAQ: MU ) is suffering from an industry-wide supply imbalance and pricing issues, which have reversed many of the gains from the pandemic-fueled boom. The company has implemented measures to reduce the impact, such as reducing capital expenditure and speeding up production capacity.
Slowdown
In the first quarter, the Boise-headquartered semiconductor company posted a loss for the first time in about six years. It wasn’t immune to the selloff that battered tech stocks last year, but the stock bounced back from early declines and soon stabilized, avoiding further losses. With the weakness down, MU gathered some momentum last week and looks poised to remain positive ahead of next week’s earnings.
Read management/analyst commentary on monthly results
The general slowdown in the semiconductor industry and the cyclical nature of the company’s business give a dim view of the outlook this year. That, along with the company’s technology spending cuts, should be cautious about investment. For that reason, the market will follow Micron’s upcoming quarterly report.
Mixed Outlook
Overall, it is expected to improve in the second half of the year as customer inventory appears to be moving to healthy levels. This will have a positive impact on shipments and profits, but profits will remain under pressure throughout the year. Ongoing challenges in key target markets, including muted PC sales and declining smartphone demand, and uncertainty in the Chinese market remain issues for the company.
Micron started fiscal 2023 on a somewhat bleak note, with all four operating segments contracting twice as much in the first quarter. The result was a 47% drop in total profit – to about $4 billion – dragging the company to a loss of $0.04 per share, excluding one-off items, from earnings of $2.16 per share in the previous year. The following also missed the Street’s view, after consistently beating every quarter for the past few years. Anticipating continued weakness, management has forecast lower revenue and net loss for the second quarter.
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Micron CEO Sanjay Mehrotra has said, “Customer inventories, which drive short-term demand, are expected to continue to improve, and we expect most customers to reduce inventories to relatively healthy levels by mid-calendar 2023. As a result, we expect fiscal second-half revenue to increase over the first half of our fiscal year .We expect days of inventory (DIO) to peak in the current fiscal Q2 and gradually improve over the next few quarters, as bit shipments increase and supply growth slows.
Q2 weak?
Market observers forecast a loss of $0.75 per share for the February quarter, showing a sharp decline from the previous year’s period when the company registered earnings of $2.14 per share. Estimated profits more than halved to $3.74 billion in the second quarter. The results are scheduled to be published on March 28, after the market closes.
Shares of Micron opened Monday’s session at $56.70 and traded down in the early hours. In the past few months, they often do a wide market.
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