By Senad Karaahmetovic
Micron Technology (NASDAQ:MU) is due to report FQ4 earnings after the market close today. Since the last earnings report in late June, as many as 5 analysts downgraded Micron shares to reflect the weakening macro environment.
The latest downgrade came from a Mizuho analyst, who downgraded Micron stock from Buy to Neutral with a price target of $56.00 (down from $75.00).
"Our recent checks show steepening price declines into DecQ and 1H23. Also, key data center/server markets are starting to show weakness, with softening demand in China/Europe and slowing CPU/GPU ramps,” the analyst said in a client note.
The market consensus sits at $0.82 EPS on revenue of $5.98 billion, a significant deceleration compared to $6.81 billion generated in FQ3.
In addition to the Mizuho analyst's comments, here is what Bank of America and Citi have to say about Micron's upcoming earnings report.
A Citi analyst: "We expect the company to print and guide below the consensus due to excess DRAM inventory and lower demand. We expect DRAM pricing to decline until 1Q23, though we expect the downturn to be mitigated by capex cuts which sets the DRAM industry up well for a rebound in 2023 no matter how bad demand is. We are trimming our estimates and reiterate our Buy rating as we believe Micron is exhibiting three signs of a bottom - lower capex, trough valuation. and most of the downside in consensus estimates."
A BofA analyst: "Consensus is braced for weak results/outlook, and meaningful cuts to FY23 capex. The stock is nearing its historical trough at 1x book (~$44.60/sh), which could provide some temporary floor/relief. However, we expect any stock recovery to be short-lived until there is clarity on: 1) recovery in end-demand (tough given high consumer PC/phone exposure and decelerating data center), and 2) clearing of balance sheet inventory. MU's views around FY23 FCF could also influence future book value estimations of stock. We maintain our Neutral rating due to balanced risk-reward, but believe any meaningful stock recovery could be pushed into early CY23E."
Micron shares are down almost 3% today.