What Happened: Shares of memory chips maker Micron (NYSE:MU) fell 5.48% in the morning session after the company reported mixed fourth quarter earnings results. Non-GAAP EPS guidance for the next quarter was below expectations, driven by a weaker-than-expected outlook for gross margins. In addition, free cash flow missed. On an absolute basis, Micron's margins are still falling year on year and in negative territory, which is illustrative of the "challenging environment for the memory and storage industry" called out by management.
On the other hand, revenue and non-GAAP EPS beat analysts' expectations this quarter. Next quarter's revenue guidance also exceeded Wall Street's estimates. Overall, the results could have been better.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Micron Technology? Find out by reading the original article on StockStory.
What is the market telling us: Micron Technology (NASDAQ:MU)'s shares are somewhat volatile and over the last year have had 14 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was six months ago, when the stock gained 6.57% on the news that the company reported earnings. While the results trailed the consensus estimates for revenue and operating profits, Wall Street analysts noted that the semiconductor company had faced a steeper slump than anticipated, but signs of a rebound are emerging. The outlook from the company was optimistic, with Sanjay Mehrotra, the chief executive, affirming his "confidence" in the long-term demand scenario and envisaging "gradual improvements" in the industry's supply-demand equation. The stock reaction suggests that the market is putting more weight on longer-term risk/reward than near-term cyclical results.
Micron Technology is up 27.9% since the beginning of the year, but at $64.59 per share it is still trading 12.6% below its 52-week high of $73.93 from May 2023. Investors who bought $1,000 worth of Micron Technology's shares 5 years ago would now be looking at an investment worth $1,420.
