Forecast Fails: Micron Stock Drops 8%

Micron’s stock drops 8% as the company’s revenue estimate of $7.4–$7.8 billion falls short of analyst estimates.

TakeAway Points:

  • Micron’s sales estimate of $7.4–$7.8 billion fell short of some high predictions, causing company shares to drop 8%, despite solid Q3 results.
  • The selloff highlighted uncertainty in the semiconductor industry and hurt other AI-related firms, such as Samsung and SK Hynix.
  • The market for Micron’s AI-driven products is still strong, with forecast price hikes in 2024 and large revenue growth in high-bandwidth products by the company’s fiscal year 2025.

Micron’s Revenue Forecast Fails

Micron Technology Inc. experienced a significant selloff in extended trading, with shares falling about 8% after the company’s revenue forecast failed to meet the highest estimates. 

The memory chipmaker projected fiscal fourth-quarter sales between $7.4 billion and $7.8 billion, aligning with the average analyst estimate of $7.58 billion but falling short of some projections that exceeded $8 billion. Profit is expected to be around $1.08 per share, slightly above the projection of $1.02. Despite better-than-expected third-quarter results, with revenue rising 82% to $6.81 billion and a profit of 62 cents per share, investors were disappointed by the forecast.

Andrew Jackson, head of Japan equity strategy at Ortus Advisors Pte in Singapore, commented on the reaction, stating that “the market is holding totally unrealistic expectations, as many names who are beating street estimates by a wide margin are still being sold down.” He added, “Too many paper hands chasing the fast, easy money.”

Effect on Stocks Linked to AI

Micron’s news had a ripple effect on other AI-related stocks, triggering drops in South Korea’s Samsung Electronics Co. and SK Hynix Inc., both key players in the AI supply chain. 

This comes days after Nvidia Corp., a leading AI chipmaker, saw its shares slump by nearly half a trillion dollars. The global semiconductor sector has been volatile, with a gauge tracking semiconductor shares falling about 5% since reaching an all-time high earlier this month.

Tom Kang, director at Counterpoint Research, noted that Micron’s briefing fell short compared to SK Hynix, which announced that its HBM production capacity is largely sold out through 2025. “Micron lacks the dominant position in AI memory that SK Hynix enjoys or in the broader memory industry that Samsung has. This brings a reality check to the AI sector, which looks bubblish.”  Kang said. 

Performance and Projections in Finance

Micron’s shares had more than doubled in the past year, driven by investor expectations of benefiting from AI spending. The company reported $332 million in net income, or 30 cents per share, compared to a net loss of $1.9 billion, or a loss of $1.73 per share, in the year-ago quarter. 

Micron sold $100 million of new HBM3e chips in the just-completed quarter and predicts that total sales of high-bandwidth products will rise to “several hundred million dollars” in the current period, increasing to multiple billions in fiscal 2025.

Chief Executive Officer Sanjay Mehrotra highlighted the company’s AI business, stating, “Robust AI-driven demand for data center products is causing tightness on our leading-edge nodes.” He added, “Consequently, we expect continued price increases throughout calendar 2024 despite only steady near-term demand in PCs and smartphones.”

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