Micron (MU), a maker of microchips and other memory and storage devices, has lost about 16% in the last six months, after having gained 44% over the past year.
The downward trend continues. The stock took a hit of about 3% post-earnings and closed at $73.10 per share on Tuesday.
Though Micron’s Q4 performance was strong, with higher-than-expected revenues and earnings growth, the company’s forward guidance was a sore point, reflecting weak demand for Micron’s chips in the near future.
On a positive note, Micron continues to generate billions in free cash flow and pays a dividend, all of which might help the company regain its lost momentum.
For now, I am Neutral on Micron stock. (See Micron Dividend Date and History on TipRanks)
Let’s Review the Results
The rising data center business, strength in the Embedded Business Unit, and high NAND demand, fueled by 5G phones, remained positives during the quarter.
Sales at the memory-chip manufacturer climbed 36.5% year-over-year to $8.27 billion, above analyst’s forecasts of $8.21 billion.
Meanwhile, adjusted earnings of $2.42 per share increased 124% from the year-ago quarter and above analysts’ expectations of $2.32 per share.
Though the earnings statistics remained impressive, the management’s lower-than-expected projections had investors worried.
Disappointing Guidance
For fiscal Q1, Micron anticipates sales to be in the $7.45-$7.85 billion range. The forecast’s midpoint of $7.65 billion fell short of the $8.63 billion average expectation.
Earnings are projected to be in the range of $2.00 to $2.20 per share in the upcoming quarter, compared to a consensus expectation of $2.61 per share.
The guidance indicated ongoing component shortages, weakening PC trends, and price concerns.
Paysafe: Analyst’s Take
Following the fiscal Q4 results, Mizuho Securities analyst Vijay Rakesh reiterated a Buy rating on the stock, but decreased the price target to $90.00 from $97.00. This implies 23.1% upside potential to current levels.
The five-star analyst was concerned about “weakening PC trends” and “inventory buildup.” He does anticipate, though, that demand for mobile and server devices will remain high in the foreseeable future.
In addition, despite “pricing worries,” he expects total margins to stay steady, thanks to a “muted cost decline benefit” offset by a “better product mix.”
Micron stock commands a Strong Buy consensus rating, based on 16 Buys and 5 Holds.
As for price targets, the average MU price target of $107.67 implies 47.3% upside potential from the current levels.
Disclosure: On the date of publication, Shalu Saraf had no position in any of the companies discussed in this article.
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