Micron Profits due today. What to expect – and what they mean for the stock.

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Micronic technology

the stock has barely moved this year, giving investors little reason to be excited about the memory maker. But that could change on Tuesday when the company releases its results.

Micron (ticker: MU) is expected to release its fourth quarter results after the closing bell. The consensus estimate is adjusted earnings of $ 2.33 per share on revenue of $ 8.22 billion. Micron released earnings forecasts of $ 2.20 to $ 2.40 per share and revenue of $ 8 billion to $ 8.4 billion, according to FactSet. In the quarter of last year, Micron reported adjusted earnings of $ 1.08 per share on revenue of $ 6.06 billion.

Citi Research analyst Christopher Danely expects Micron to report earnings in line with consensus estimates and executives to issue guidance that is lower than the first quarter fiscal forecast. He is bullish on the company, reiterating a buy note on the stock.

But he predicts that company-made memory will be 5-10% cheaper in the fourth quarter and 10% cheaper early next year. This drop is likely a short-term problem, he wrote in a note released on Monday. Danely expects the price of memory to drop as much as 10% in the first quarter of 2022 and recoup that 10% in the second half of next year.

Such a price drop would be mainly the result of the personal computer market, which accounts for about 20% of the global demand for dynamic random access memory. Danely said demand for memory for PCs will dry up and large-scale data center companies’ inventories will remain high.

Due to the drop in memory prices, Danely reduced its 2022 revenue estimate to $ 32.50 billion and its profit to $ 8.82 per share. The consensus among analysts tracked by FactSet is of $ 10.87 per share for fiscal 2022 on revenue of $ 36.25 billion. Danely said the worst memory price drops will occur in the first three months of 2022, and the company’s gross margins will hit a low of around 40%. Analysts expect gross margins of 47% for the fourth quarter.

Danely predicted the company will cut capital spending soon, due to falling memory prices, suggesting it will do so early next year.

Of the analysts who cover Micron, 88% note a buy and 13% have a Hold rating on the stock. There are no sales notes on Micron, according to FactSet. The average target price is $ 110.10, which implies a 47% increase.

Micron shares were up 1.5% to $ 75.40 on Monday’s trading. The stock has remained stable this year as the

PHLX semiconductor index,
or SOX, increased 23%.

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