Micron
Micron is one of the world's leading memory chipmakers, so its shares are extremely connected to global growth and the outlook for tech spending. Thus, it's not surprising that its shares have been under pressure as of late with deteriorating global growth prospects and increasing recession risk.
For much of 2022, we saw Micron report strong earnings reports but shares fell off as investors overlooked near-term good news. So, it's definitely worth noting that the stock was bought despite a weaker than expected outlook, indicating that bad news may already be reflected in the stock price.
Inside the Numbers
In its fiscal Q3, Micron reported an adjusted $2.59 per share in earnings, beating expectations of $2.43 per share in earnings. Revenue was in-line with expectations at $8.64 billion vs $8.64 billion. Compared to last year's Q3, earnings were up 38%, while revenue was 16% higher.
This quarter, Micron disappointed as it projects adjusted earnings of $1.63 a share and sales of $7.2 billion. This was below expectations of $2.60 in EPS and $9.15 billion in revenue. It's also a sharp drop from last year's $2.42 in EPS and revenue of $8.27 billion.
The company attributed this weakness to weakening demand in the near term, although it says demand continues to grow on a long-term, secular basis. Specifically, it cited weak smartphone and PC sales in China due to demand and supply issues amid the company's lockdowns and a slowing economy. It also sees high inventories following increased demand due to supply chain issues.
Following this surprise guidance cut, 15 analysts reduced their price target on the stock. There's increasing evidence that the economic slowdown is starting to affect enterprise tech spending which had been immune for so long.
For bulls, the one silver lining is that prices moved higher despite the bad news, indicating that it may already be priced in.
