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Large inventories of Micron Technology Inc. in the last quarter are facing a crucial test of the actual improvement in the memory chip market when the chip maker announced results this week.
Micron
MU, + 0,90%
should close its fiscal year with a report on fourth quarter results after market close on Thursday.
The memory chip industry is moving into a completely different space from a year ago, when prices were still rising, inventory problems had not yet shaken the industry, and the general manager of Micron, Sanjay Mehrotra, had stated that the memory chip market had become structurally different in a world-only PC-station. In 2019, chip manufacturers faced a decline in sales as semiconductors reached price and earnings highs by the end of 2018, but during the previous earnings season, a few indicators showed that a potential rebound could occur in the second half.
Memory chips were particularly hard hit, as customers loaded on DRAM and NAND chips in 2018, as prices rose, which then dropped. DRAM, or dynamic random access memory, is the type of memory commonly used in desktops and servers, while NAND chips are the flash memory chips used in USB drives and small devices such as cameras digital.
What to expect
Earnings: Of the 27 analysts surveyed by FactSet, Micron is expected to post an average adjusted earnings of 51 cents per share, down from 80 cents expected at the beginning of the quarter and $ 3.53 reported for the same period from the previous year. . Estimize, a software platform that uses crowdsourcing from hedge fund executives, brokerages, buyer-side analysts and third parties, claims a profit of 60 cents per share.
Returned: Wall Street expects Micron to achieve a $ 4.59 billion business figure, according to 27 analysts surveyed by FactSet. This is lower than the forecast of $ 4.91 billion announced at the beginning of the quarter and $ 8.44 billion reported in the same quarter of the previous year. Estimize forecasts revenues of $ 4.61 billion.
Movement of stock: Micron's shares have jumped 52% since the company's last earnings report. CEO Mehrotra has been expecting "strong sequential growth" in the fourth quarter as inventory issues improve. In comparison, the S & P 500 index
SPX, -0.01%
gained 2.6% during this period, while the Nasdaq Composite Index
COMP -0.06%
gained 2.9% and the PHLX Semiconductor index
SOX, + 0.96%
earned 13%.
What analysts say
Eric Ross, chief investment strategist at Cascend Securities, who has a purchase rating and recently raised his price target from $ 55 to $ 65, said that Micron represented a "good value for money" at long term and that the seasonal recovery sector sales of smartphones and data centers.
"Our DRAM indicator suggests that we have still seen the bottom of this cycle," Ross said.
Vijay Rakesh, an analyst at Mizuho, who has a purchase price and a target price of $ 50 on the stock, said the controls indicate that memory trends for DRAM and NAND are improving. but that Micron does not get the best of it.
"DRAM contract prices for August are stable and have declined much more slowly, down 5% from previous expectations of 5-10% q / q and flattening in June-July given initial concerns. between Japan and South Korea, "said Rakesh.
For Micron, however, Rakesh said that while short-term DRAM trends were better, they were weak in the second half, as inventories remained high.
Of the 33 analysts who cover Micron, 20 have a purchase or overweight rating, 10 have a holding rating and three have an odds or underweight, with an average price target of $ 50.09, or 1% more than Monday's closing.
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