MU - Micron Earnings Look-Ahead: Focus on China ban impact pricing environment

2023-09-26 12:38:35 ET

When Micron Technology ( NASDAQ: MU ) reports its fourth quarter results on Wednesday, investors will majorly focus on the memory chipmaker’s commentary regarding the pricing and demand environment, as well as the impact of restrictions placed on its products by China.

Wall Street expects Micron to post a loss per share of $1.18, while revenue is expected to fall more than 40% to $3.93 billion.

Micron was the first chipmaker to be targeted by Beijing amid a spat between China and the U.S. over semiconductor supply and in particular, the advancement of China’s chip industry.

Earlier in May, the Chinese government said it found Micron’s products having "relatively serious" potential network securities issues and warned operators of critical information infrastructure to stop purchasing the goods.

Investors dumped shares after Micron said that half of its revenue from China is at risk of being lost. Analysts believe that Micron’s competitors could benefit from the ban, with companies like Samsung and SK Hynix fulfilling the demand of Chinese customers given strong market position in DRAM and NAND.

However, Barclays analyst Tom O’Malley is optimistic about a shoot in recovery for Micron despite the ban.

"We admittedly are a bit surprised by how quickly Micron was able to offset the ban without a material pricing impact," he wrote.

Investors are expecting margin improvement and positive commentaries on demand for its chips from the artificial intelligence front, even as spending on consumer electronics including PC and handsets is still an area of weakness.

Wedbush analyst Matt Bryson said that artificial intelligence is buoying demand for dynamic random access memory (DRAM), as requirements for DDR5 and high-bandwidth memory have "accelerated" over the period.

Mizuho analyst Vijay Rakesh also noted that inventories should decline into the end of the year, while DRAM and NAND are "starting to improve."

Over the last two years, Micron has beaten EPS estimates 75% of the time and has beaten revenue estimates 50% of the time.

Seeking Alpha analysts and Seeking Alpha's Quant rating are viewing the stock conservatively with "hold" rating, while Wall Street analysts are considering it a "buy" with a score of 4.13.

Boise, Idaho based Micron, which specializes in making DRAM and NAND memory chip, has gained nearly 36% so far this year.

Over the last there months, EPS estimates have seen nine upward revisions compared to 17 downward revisions, while revenue estimates have seen 10 upward revisions versus 17 downward moves.

More on Micron

• Seeking Alpha’s Quant Rating on Micron
• Micron Earnings: Investors Will Be Focused On HBM Upside Potential
• Micron: What To Expect From This Week's Earnings
• Micron: A Palpable Downturn

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