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Goldman Sachs, Others Slash Targets After Micron's Weak Guidance

There is no joy in Boise, tonight, the mighty Micron Technology Corp. (NYSE: MU) has struck out. The memory chip maker reported fiscal third-quarter earnings after markets closed on Thursday. It posted better than expected earnings per share but missed the revenue estimate by less than 1%.

And that was the good news. The less good news is that the current quarter is not expected to improve, and CEO Sanjay Mehrotra’s comment indicated that 2023 is unlikely to be any better. In the press release, Mehrotra said, “Recently, the industry demand environment has weakened, and we are taking action to moderate our supply growth in fiscal 2023.” He also noted that Micron is “confident” regarding long-term demand for its products and the company is “well positioned to deliver strong cross-cycle financial performance.”

Analysts do not fully agree. One firm has downgraded the stock and four have cut their price targets. The stock posted a new 52-week low less than 30 minutes after Friday’s opening bell. The company posted its 52-week high in early January.

Analysts Vivek Arya and Blake Friedman at BofA Global Research cut the rating on the stock from Buy to Neutral and lowered the $70 price target on the shares to $62, a drop of 11.4%. At a share price of around $52.90, the upside potential to that target is 17.2%.

BofA’s analysts note that fourth-quarter guidance is 21% below Wall Street estimates and 13% below sales in the same period last year. Micron’s guidance is the result of weak consumer demand for personal computers and smartphones, Chinese lockdowns and falling enterprise sales due to supply chain constraints for other components such as network cards.

Arya and Friedman also observed, “Valuation is low, and a large reset provides a near-term stock rebound potential, but fundamental growth recovery could be well into CY23 in our view.” Because Chinese sales accounted for half of the third-quarter sales miss, a recovery in China could help improve fourth-quarter results. Cloud data center spending also is expected to be strong into next year.

On the downside, weak third-quarter sales are exacerbating inventory levels, and that build-up “is expected to cause a multiquarter slowdown.” High inventory levels also contributed to gross margin guidance that was below expectations.


Goldman Sachs analysts Toshiya Hari, Mark Coates and Francis Mejia left their Buy rating on Micron stock but cut their 12-month price target from $86 to $75, a reduction of 12.8%. Micron’s upside potential to the new target is 41.8%.

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