Strong sales of memory chips for data centers running artificial intelligence applications weren't enough to offset weakness in PC and smartphone markets for Micron Technology in its fiscal first-quarter report. MU stock dropped Thursday on the news.
Late Wednesday, Micron roughly matched analyst estimates for the quarter ended Nov. 28. But it badly missed views with its outlook for the current quarter.
The Boise, Idaho-based company earned an adjusted $1.79 a share on sales of $8.71 billion in its fiscal Q1. Analysts polled by FactSet had expected Micron earnings of $1.76 a share on sales of $8.71 billion. In the year-earlier period, Micron lost 95 cents a share on sales of $4.73 billion.
For its fiscal second quarter, Micron expects to earn an adjusted $1.43 a share on sales of $7.9 billion. That's based on the midpoint of its guidance. Wall Street had been modeling earnings of $1.91 a share on sales of $8.94 billion in fiscal Q2. In the year-ago quarter, Micron earned 42 cents a share on sales of $5.82 billion.
Micron Stock Gets Price-Target Cuts
On the stock market today, Micron stock tumbled 16.2% to close at 87.09.
At least 15 Wall Street analysts lowered their price targets on Micron stock after the Q1 report.
BofA Securities analyst Vivek Arya downgraded MU stock to neutral from buy and cut his price target to 110 from 125.
"Data center and HBM (high-bandwidth memory) trends remain strong but weakness in PC and phone markets are putting downward pressure on memory pricing, especially in Nand," Arya said in a client note.
Micron makes two main types of computer memory: DRAM and Nand. DRAM chips act as the main memory in PCs, servers and other devices, working closely with central processing units. Nand flash memory provides longer-term data storage.
Micron Bullish On Data Centers
On a conference call with analysts, Micron Chief Executive Sanjay Mehrotra was bullish on the HBM market for AI data centers.
"The HBM market will exhibit robust growth over the next few years," he said. Mehrotra expects the total addressable market for high-bandwidth memory to exceed $100 billion by 2030 from $16 billion in 2024. Micron pegged the market size in 2025 at $30 billion.
"This HBM growth will be transformational for Micron, and we are excited about our industry leadership in this important product category," Mehrotra said.
In the first quarter, data center business accounted for more than 50% of Micron's sales for the first time. Data center sales increased more than 400% year over year and 40% sequentially, Mehrotra said.
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