Shares of memory chip company Micron Technologies ( MU -2.19% ) fell 2.2% today. In actuality, the stock is down some 10% because Micron described earnings on the night of March 29. It was a sound quarterly update, a person that conquer expectations and confirmed Micron’s momentum continuing by this year as the environment proceeds to experience from a lack of chips.
As for precise figures, Micron management mentioned that in the 2nd quarter of fiscal 2022 (the 3 months finished March 3), product sales and modified earnings rose 25% and 118% year more than yr, respectively. Pricing on its memory chips is envisioned to rise at a double-digit proportion for the equilibrium of the yr as need for digital components continues to outpace the offer Micron can crank out.
That usually means at least a couple more quarters of solid advancement is probably. So why the glum mood amid Micron buyers? Some inventory analysts are commencing to audio the alarm on the marketplace, noting that white-warm desire (particularly for shopper gadgets) could possibly get started to ease in 2023.
Notably, Barclays analysts led by Blayne Curtis downgraded Innovative Micro Equipment ( AMD -1.05% ) this week from outperform to execute, citing a achievable slowdown in progress following yr.
Probably Micron is slipping in sympathy with AMD. This would make feeling, offered that digital memory chips are a basic commodity bundled in extra-complex semiconductor units and computing gadgets (like what AMD layouts). If larger-purchase chip organizations sneeze, Micron could catch chilly. Traditionally, this has been the situation. The semiconductor industry is cyclical, and Micron particularly so.
On the other hand, there are simple secular development trends propelling Micron and the total semiconductor entire world increased. Administration pointed to its facts-center, automotive, and industrial-device segments as locations of particular be aware on the very last earnings phone. Additional-complex know-how requirements a lot more memory, a craze that must continue to keep Micron revenue chugging increased for a lot of yrs to come (albeit at a much more wild up-and-down tempo than a lot of of its friends).
The stock trades for significantly less than 10 periods trailing-12-month earnings, and fewer than 18 times trailing-12-month totally free hard cash stream. It is anyone’s guess when the upcoming downturn in chip profits arrives, but Micron has listened to this tale prior to. It is really in wonderful economic form and completely ready to weather the storm.
This write-up represents the view of the writer, who may possibly disagree with the “official” recommendation posture of a Motley Fool high quality advisory assistance. We’re motley! Questioning an investing thesis – even a person of our possess – assists us all think critically about investing and make selections that support us turn out to be smarter, happier, and richer.