Why Micron Technology shares fell more than 2% today

What happened

Memory chip maker shares Micron Technology (MU -2.19% ) fell 2.2% today. In fact, the stock is down about 10% since Micron announced its earnings on the evening of March 29. This was a strong quarterly update, which exceeded expectations and showed Micron’s momentum continuing throughout this year as the world continues to suffer from a shortage of potato chips.

So what

As for specific numbers, Micron management said that in the second quarter of fiscal 2022 (the three months ending March 3), sales and adjusted earnings increased 25% and 118% higher. year on year, respectively. The price of its memory chips is expected to rise by a double-digit percentage for the rest of the year as demand for electronic components continues to outstrip the supply Micron can produce.

This means that at least two more quarters of strong growth are likely. So why the gloomy mood of Micron investors? Some stock analysts are starting to sound alarm bells on the industry, noting that scorching demand (particularly for consumer devices) may start to cool off in 2023.

Especially, Barclays analysts led by Blayne Curtis declassified Advanced micro-systems (AMD -1.05% ) this week outperformed performance, citing a possible slowdown in growth next year.

Now what

Maybe Micron falls in sympathy with AMD. This makes sense, given that digital memory chips are a commodity included in more complex semiconductor units and computing devices (like what AMD designs). If the upper-tier chip companies are sneezing, Micron could catch a cold. Historically, this has been the case. The semiconductor industry is cyclical, and Micron in particular.

Data by YCharts. TTM = last 12 months.

However, there are undeniable secular growth trends that are propelling Micron and the entire semiconductor world higher. Management highlighted its data center, automotive and industrial device segments as particularly notable areas in the latest earnings call. More complex technology requires more memory, a trend that should keep Micron’s sales up for many years to come (albeit at a faster rate than many of its peers).

The stock trades at less than 10 times trailing 12-month earnings and less than 18 times trailing 12-month free cash flow. No one knows when the next chip sales downturn will come, but Micron has heard that story before. He is in excellent financial shape and ready to weather the storm.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

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