How Micron (MU) Will Perform In The Third Quarter of 2023

(CTN News) – In the past three months, Micron (MU) has risen more than 14%, compared to the 7% gain experienced by its sector on average. In addition to rising 34% in six months, the stock is up 32.5% year to date, outpacing the S&P 500’s 14% rise.

The semiconductor specialist has performed well not just among its semiconductor peers, but also among technology stocks in general.

Following Wednesday’s closing bell, investors eagerly await the company’s fiscal 2023 third quarter earnings results to see whether the stock can maintain its momentum.

According to Citigroup analyst Christopher Danely, that is a likely scenario.

Micron stock received a Buy rating from Danely earlier this month with a $75 price target. With the stock currently trading around $65, Danely’s price target assumes a potential premium of more than 15%.

The company has not only benefited from improved prospects in the memory chip market, but also from the excitement surrounding generative AI, which may boost its earnings. There is a high degree of cyclicality in Micron’s memory chip business.

In addition to weak memory chip demand and falling prices, the company has also faced supply chain headwinds in an already highly volatile memory market.

As the memory supply chain bottoms out in the second half of 2023, a cyclical recovery is expected in early 2024.

It is for this reason that the stock has done so well in recent months. If the top and bottom lines are beat on Wednesday, along with a positive Q4 guidance, it will continue to do so.

The company, based in Boise, Idaho, expects to lose $1.57 per share on revenue of $3.67 billion for the quarter ended May 31.

Revenue of $8.64 billion translated into earnings per share of $2.59 a year ago. A year ago, the company posted an $8.35 profit per share, but is now expected to lose $4.63 per share for the full year ending in August.

Revenue is expected to decline 50% year over year to $15.36 billion.

Despite Micron’s projected decline in revenue and profits, the company’s memory chip business is cyclical.

Although memory chip demand is expected to decline, the market appears encouraged by the prospects. The second half of this year may also see a rebound in smartphone and PC chips.

According to analysts, Micron’s memory semiconductor inventories have peaked, putting pressure on chip prices. Due to supply cuts, inventories are also expected to decline.

Therefore, industry conditions should improve. In the meantime, management has trimmed operating expenses to maintain margins and preserve the company’s balance sheet.

When demand and price stability return, the company will be able to achieve its profitability goals. During Micron’s second quarter, revenue fell 52% year over year to $3.69 billion, missing Street estimates by $20 million.

The Q2 adjusted loss of $1.91 missed estimates by $1.03. On the other hand, the Q3 revenue guidance of $3.70 billion suggested flat sequential growth.

Possibly, the company has reached the trough of its struggles and is on the verge of a rebound. Aside from offering positive guidance that reassures investors that memory pricing can rebound in the quarters to come, the company will need to discuss these topics on Wednesday.

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