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By Wallace Witkowski
Samsung not chopping capex makes restoration view murky
Micron Expertise Inc.’s outcomes and outlook present the memory-chip market might be at its worst downturn in 13 years and analysts count on the bounce again could take some time.
Late Wednesday, Micron (MU) reported outcomes and forecast an outlook that fell in need of Wall Road expectations whereas trimming its workforce by 10% and chopping prices as a lot as attainable.
“It is so unhealthy, it is good? Inching nearer to a backside…” is the way it was solid by Evercore ISI analyst C.J. Muse, who has an outperform score and a $65 goal.
Whereas there was excellent news within the type of a probable backside of shipments in November, Muse mentioned the unhealthy information was the “timing of significant restoration is unclear” as the opposite elements of the “DRAM oligopoly” diverge as Samsung Electronics Co. retains its capex flat whereas, SK Hynix Inc. cuts again like Micron.
“Utilization reductions will proceed longer than initially anticipated, probably weighing on Micron’s profitability into CY24,” Muse mentioned. “In flip, the corporate has suspended share repurchases with capital returns through dividend solely (not less than close to time period).”
“Add all of it up and we’re within the worst reminiscence downturn in 13 years and a restoration will merely take time,” Muse mentioned.
Cowen analyst Krish Sankar, who has an outperform score and a $60 worth goal, mentioned “this name sheds the sunshine on how briskly this downcycle is progressing and its monetary impression that’s worse than many have anticipated.” Sankar expects Micron’s gross margins to fall to five%, or their lowest since 2009.
“Additional CapEx cuts from MU are modestly serving to sentiment, however absent materials cuts in Samsung manufacturing amid muted end-demand and a dangling recession, the outlook might get murkier,” Sankar mentioned. “Put up name, our view has not modified a lot and the bull case of a C2H23 restoration as buyer stock will get labored down is sensible.”
Of the 39 analysts who cowl Micron, 29 have buy-grade rankings, eight have maintain rankings, and two have promote rankings. Of these, 11 lowered their worth targets and two raised theirs after the earnings report, leading to a median goal of $64.74, down from a earlier $67.07, in response to FactSet information.
Micron shares fell 3.5% Thursday to shut at $49.43, in contrast with a 1.5% decline within the S&P 500 index , a 2.2% fall on the Nasdaq Composite Index , and a 4.2% drop on the PHLX Semiconductor Index .
For the 12 months, Micron shares are down 46.9%, whereas SOX index has fallen 35.8%, the S&P 500 has dropped 19.8%, and the Nasdaq has shed 33%.
-Wallace Witkowski
(END) Dow Jones Newswires
12-23-22 0737ET
Copyright (c) 2022 Dow Jones & Firm, Inc.
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