Micron (MU) Q3 2023 Earnings: What to Expect


The improved prospects for memory chips have driven a rebound in Micron (MU), which has risen some 14% over the past three months, compared to its sector median increase of 7%. Not only has the stock risen 34% in six months, the shares are up 32.5% year to date, besting the 14% rise in the S&P 500 index.

That performance has placed the semiconductor specialist among the best stocks to own not only in its semiconductor peer group, but also overall among technology stocks. Ahead of its third quarter fiscal 2023 earnings results which are due after Wednesday’s closing bell, investors are eager to learn whether the company can sustain the momentum the stock has shown into the next quarter. And that is a likely scenario according to Citigroup analyst Christopher Danely.

In a note to investors earlier this month, Danely reiterated a Buy rating on Micron stock with a $75 price target. Currently trading at around $65, Danely’s price target assumes potential premiums of more than 15% from current levels. Micron has benefited not only from improved prospects in the memory chip business, but also from the excitement of generative AI, which could help bolster its earnings recovery. Micron’s memory chip business is highly cyclical.

Aside from weak memory chip demand and falling prices, the company has also dealt with supply chain headwinds in a memory market which were already highly volatile to match fluctuations with demand. The memory supply chain is expected to bottom out in the second half of 2023, which will lead into a cyclical recovery in early 2024. This explains why the stock has done so well in recent months. It will continue to do so, assuming a top and bottom line beat on Wednesday, along with positive Q4 guidance.

For the quarter that ended May, the Boise, Idaho-based company is expected to lose $1.57 per share on revenue of $3.67 billion. This compares to the year-ago quarter when earnings came to $2.59 per share on revenue of $8.64 billion. For the full year, ending in August, the company is projected to lose $4.63 per share, reversing a year-ago profit of $8.35 per share a year ago, while full-year revenue of $15.36 billion would decline 50% year over year.

The projected full-year decline in Micron’s revenue and profits underscore the cyclical nature of Micron’s memory chip business. Despite the projected declines, the market appears nonetheless encouraged by the prospects of improved memory chip demand. What’s more, there are data points suggesting a rebound in smartphone and PC chips could be seen in the second half of the year.

Analysts expect Micron’s memory semiconductor inventories, which has pressured chip prices, to have peaked. Inventories are also expected to decline as a result of supply cutbacks. This means industry conditions should start to improve. The management, meanwhile, has made the best of the bad situation by trimming operating expenses to maintain margins and preserve the company’s balance sheet.

These cost cuts will help the company achieve its profitability goals as it waits for demand and price stability to return. In the second quarter, Micron reported revenue of $3.69 billion, which as down 52% year over year, missing Street estimates by $20 million. Q2 adjusted loss of $1.91 also missed estimates by $1.03. But the Q3 revenue guidance of $3.70 billion was encouraging because it suggested flat growth sequentially.

The flat growth suggested that the company might have reached the trough of its struggles and a rebound is underway. On Wednesday these are among the topics the company will need to discuss, along with issuing positive guidance that instills investors confidence that memory pricing can rebound in the quarters ahead.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Original Post

Articles You May Like

My father has dementia and ‘forgave’ my brother’s $200,000 house loan. The nursing-home notary said he was of sound mind. What can we do?
How Being A ‘Lousy Employee’ Fueled Mark Cuban’s Success: “I Was A Know-It-All”
George Santos expelled from Congress in House vote. Here’s what comes next.
Zee Business LIVE | Investment Tips | Share Market Live Updates|Stock Market News|29th November 2023
Singapore once again the world’s most expensive city to live in: EIU

Leave a Reply

Your email address will not be published. Required fields are marked *