Micron MU stock has fallen roughly 27% over the last year as fears about the cyclical nature of the chip and memory industry set in. So, let’s take a look at what investors should expect from Micron and MU stock in 2019 after the company posted lower-than-expected quarterly guidance in December.
Quick Q1 Overview
Micron topped our fiscal Q1 2019 earnings estimate on December 18, but fell just short of top-line expectations. Yet investors sold off the stock on the back of disappointing second quarter guidance.
Micron’s management forecasted fiscal Q2 revenues between $5.7 billion and $6.3 billion, which fell well below the Wall Street estimate of $7.2 billion. Meanwhile, the company expects to report quarterly earnings in the range of $1.65 per share to $1.85 a share. This also marked lower-than-expected guidance.
Chief Executive Sanjay Mehrotra pointed directly to weaker DRAM demand as one of the primary reasons for Micron’s reduced Q2 guidance. Micron’s CEO said that these conditions are likely to continue throughout the first half of the new calendar year. Plus, Micron announced that it plans a “significant reduction” to its capital expenditures in fiscal 2019.
“Given this supply and demand dynamic, we are taking decisive actions to lower our DRAM bit output growth to approximately 15% for calendar 2019 versus our prior plan of around 20% bit growth,” Mehrotra said on Micron’s earnings call.
Outlook & Earnings Trends
Shares of Micron sunk following its Q1 earnings release after investors’ supply and demand fears were largely confirmed through MU’s new Q2 guidance. MU stock has, however, tried to bounce back recently. In fact, Micron saw its stock price surge 4% through mid-afternoon trading Wednesday. Shares of other chip firms, including Nvidia NVDA, AMD AMD, and Intel INTC, also jumped
Looking ahead, Micron’s Q2 revenues are projected to fall roughly 18% from the year-ago period to hit $6.02 billion, based on our current Zacks Consensus Estimate. Worse still, the company’s Q3 revenues are expected to sink 23%, while Micron’s total fiscal 2019 revenues are projected to slip 14% to $26.14 billion.
On top of Micron’s rough top-line expectations, the company is expected to see its adjusted Q2 earnings fall by 36.2% to reach $1.80 per share. Overall, MU’s fiscal 2019 EPS figure is projected to plummet 33.6%. Furthermore, Micron has received a wave of negative earnings revisions in the past 30 days.
Micron is currently a Zacks Rank #5 (Strong Sell) based on its recent earnings revision trends. With that said, MU stock could bounce back in 2019, despite its reduced outlook, because it rests far below its 52-week high and is trading at 4.5X forward earnings estimates—which marks a discount compared to the broader semiconductor industry’s 10.4X.
Still, even though the demand for memory and storage solutions will almost certainly continue to trend upward in the long run, short-term supply and demand conditions don’t look great for Micron.
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