Micron (MU  ) shares were higher despite the company issuing weaker guidance than expected and missing analysts' expectations on the top line. Initially, shares gapped down following the report but finished the day higher and added to these gains in the following session due to a strong, broad market rally.

Micron had been one of the best-performing stocks for much of the bull market that started in March 2020. As one of the world's leading memory chipmakers, its products saw incredible demand and the company enjoyed pricing power. Now with global growth slowing, the company is also feeling the effects.

YTD, shares are down 44%. It's a challenging situation as investors need to decide how much of the company's current struggles are already priced into the stock given this drawdown and its P/E of 6 and forward P/E of 12.3. The initial reaction to a bad earnings report and reduction in guidance could be a clue that investors have a longer time horizon and are willing to look past these near-term issues.

Inside the Numbers

In its fiscal Q4, Micron reported an adjusted $1.45 per share in earnings, beating expectations of $1.37 per share in earnings. Revenue missed expectations at $6.64 billion vs $6.73 billion. Compared to last year, earnings were down 40%, while revenue was 20% lower.

This quarter, Micron is forecasting earnings of $0.04 per share and revenue of $4.3 billion. This was underwhelming compared to analysts' estimates of $0.69 per share in earnings and $5.7 billion in revenue. And, it's a major decline from last year's $2.16 per share in earnings and $7.7 billion in revenue.

Some reasons for the weakness are a decline in smartphone and PC sales, especially in China. One factor is demand being pulled forward over the last couple of years due to the pandemic and stimulus. The company is reducing capital expenditures and focused on reducing inventory as it deals with the downturn. It sees the challenging market environment continuing into the first quarter of next year.