On a notably challenging day for investors, Micron Technology, a leading semiconductor manufacturer, saw its shares experience a significant decline of 16% on Thursday, marking a harsh reminder of the volatility often seen within the tech sector. This marks the company’s worst trading day since March 2020, coinciding with the tumultuous onset of the COVID-19 pandemic. The stock price plummeted to $86.78 in early afternoon trading, a staggering 45% decrease from its peak in June, illustrating dramatic investor jitters in response to the latest second-quarter guidance issued by the company.
As part of its fiscal second-quarter report, Micron provided a revenue forecast of roughly $7.9 billion, with an allowance of $200 million either way, coupled with adjusted earnings per share (EPS) projected at $1.43, plus or minus 10 cents. This outlook fell short of analyst expectations that anticipated revenues of $8.98 billion and an EPS of $1.91, according to data from LSEG. Such discrepancies between projected and expected earnings can often trigger significant shifts in stock prices, demonstrating the sensitivity of the market to financial forecasts.
In an earnings call led by CEO Sanjay Mehrotra, the company disclosed that it has been observing diminished growth rates in certain segments of the consumer device market. This slowdown appears to be attributed to “inventory adjustments” as the company navigates the evolving market dynamics. Analysts from Stifel pointed out that Micron is likely facing a protracted delay in the refresh cycle for personal computers, paired with instances of elevated inventory levels among smartphone customers. Such factors pose a considerable challenge for a company that has historically relied on robust demand from these sectors.
Despite the bleak second-quarter outlook, Micron’s previous quarter reported impressive growth. In its first-quarter results, the company surpassed expectations, with an EPS of $1.79 compared to an anticipated $1.75. Revenue leaped by an impressive 84% year-over-year to reach $8.71 billion, largely owing to a notable 400% increase in revenue generated from data center operations. This surge was driven primarily by the escalating demand for artificial intelligence technologies, indicating that while Micron is facing current headwinds, its core operations have still fostered significant growth in emerging sectors.
Despite the immediate downturn, analysts at Stifel maintained a buy rating on Micron shares, albeit with a revision of their price target, dropping it from $135 to $130. The mixed signals from Micron’s financial performance underscore the complexities underpinning the semiconductor market. Industry stakeholders will be keenly watching how the company manages its inventory levels and navigates shifts in consumer demand in the upcoming quarters, seeking indicators of how Micron might adjust to the evolving landscape shaped by both challenges and opportunities in technology.