Micron Technology (NASDAQ:MU) announced plans to slash fourth-quarter production levels for two of its major memory chips, DRAM and NAND, in order to balance out inventory levels in the market. The move comes in response to weak demand across several end markets amid a highly inflationary environment. Following the news, MU stock declined 6.7% on November 16.
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The memory-chip producer stated that it will be producing lower bits of DRAM in comparison to Q421 and increasing NAND supply by just a single-digit percentage range. Also, the company will reduce the production of wafer starts, a key component in electronic devices, by almost 20% on a sequential basis.
Further, Micron plans to undertake additional cuts in capital expenditures (capex). In its last earnings report, the company announced a 30% reduction in the Fiscal 2023 capex target.
Analyst’s Views on Production Cut
Rosenblatt Securities analyst Hans Mosesmann finds Micron’s wafer supply cut move to be “aggressive.” He believes that the DRAM supply cut may be the greatest for Micron in 2023 in comparison to the past few years. The analyst expects the production cut to help balance the supply and demand equation through 2023.
Mosesmann remains bullish on MU with a Buy recommendation, as he finds the company’s balance sheet to be strong. Additionally, he anticipates that the company’s mid and long-term prospects in the memory/storage market may be healthy.
Is Micron a Buy or Sell Stock?
MU stock has a Moderate Buy consensus rating based on 18 Buys, four Holds, and two Sells. The average Micron stock price target of $65.70 implies 11.6% upside potential.
