Memory-chip maker Micron Technology missed Wall Street's low expectations for its fiscal second quarter as it struggles through a cyclical industry downturn. However, MU stock rose Wednesday on hopes that the worst might be over for Micron.
The Boise, Idaho-based company late Tuesday said it lost an adjusted $1.91 a share on sales of $3.69 billion for the quarter ended March 2. Analysts polled by FactSet had expected Micron to lose 67 cents a share on sales of $3.71 billion. In the year-earlier period, Micron earned $2.14 a share on sales of $7.79 billion.
Micron took a charge of $1.43 billion for inventory write-downs in the second quarter. That had a negative impact on earnings of $1.34 a share.
For the current quarter, Micron predicted an adjusted loss of $1.58 a share on revenue of $3.7 billion. Wall Street was projecting a loss of 96 cents a share on sales of $3.72 billion for the fiscal third quarter. In the year-earlier period, Micron earned $2.59 a share on sales of $8.64 billion.
Micron's guidance includes an inventory write-down of about $500 million. That will negatively impact earnings by about 45 cents a share.
MU Stock Rises On Outlook
On the stock market today, MU stock jumped 7.2% to close at 63.54. During the regular session Tuesday, MU stock slid 0.9% to 59.28.
In written comments, Micron Chief Executive Sanjay Mehrotra said he sees a "gradually improving supply-demand balance in the months ahead." Customer inventories have reduced in several end markets, including data centers, he said.
However, the memory-chip segment still faces "significant near-term challenges," Mehrotra said.
"The semiconductor memory and storage industry is facing its worst downturn in the last 13 years, with an exceptionally weak pricing environment that is significantly impacting our financial performance," he said.
But the long-term outlook is bright, with investments in artificial intelligence providing another driver of demand for memory chips, Mehrotra said.
Micron Report 'So Bad It's Good'
At least six Wall Street analysts raised their price targets on MU stock after the quarterly report.
Evercore ISI analyst C.J. Muse said the Micron report was "so bad it's good." That's because the company's lower-than-expected guidance signals a possible bottom, he said. Muse rates MU stock as outperform, or buy, with a price target of 75.
JPMorgan analyst Harlan Sur reiterated his overweight, or buy, rating on MU stock and upped his price target to 75 from 65.
"As the company manages through one of the worst memory downturns, the team is starting to see some light at the end of the tunnel with inventory levels continually improving across a broad set of end markets," Sur said in a note to clients.
Pace Of Recovery Uncertain
However, other analysts were cautious about Micron's prospects.
Piper Sandler analyst Harsh Kumar kept his underweight, or sell, rating on MU stock.
"Micron continues to suffer through excess inventory at this time, and although there appears to be a glimmer of hope in the near future, we remain cautious," Kumar said in a note to clients.
Deutsche Bank analyst Sidney Ho said the bottom of the memory-chip market might have been reached but the pace of recovery is uncertain.
"The depth of the downcycle now looks deeper vs. management's prior expectations, and with a slower pace of recovery into second-half fiscal 2023," Ho said in a note to clients. He rates MU stock as hold with a price target of 55.
MU Stock Has Subpar Composite Rating
Micron makes two main types of memory chips: DRAM and Nand. DRAM chips act as the main memory in PCs, servers and other devices, working closely with central processing units. Nand flash provides longer-term data storage.
Dynamic random-access memory, or DRAM, accounted for 74% of Micron's revenue in its fiscal second quarter. Nand flash memory accounted for 24% of its revenue during the period.
MU stock ranks third out of 10 stocks in IBD's Computer-Data Storage industry group, according to IBD Stock Checkup. But it has a subpar IBD Composite Rating of 42 out of 99.
IBD's Composite Rating is a blend of key fundamental and technical metrics to help investors gauge a stock's strengths. The best growth stocks have a Composite Rating of 90 or better.
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