Micron’s shares plunged on June 26, 2015
As of the end of December 2015, Micron Technology (MU) has generated YTD (year-to-date) returns of -59%, compared to 61% in 2014. In the trailing one-month period, Micron’s stock fell by 10%, whereas in the trailing five-day period, it fell by 2.9%.
On June 26, 2015, Micron Technology announced its 3Q15 results, which showed that the company’s revenues had fallen by 3.2% YoY (year-over-year) to $3.85 billion, missing analyst estimates. A not-so-impressive 4Q15 guidance also impacted the company’s share price. On top of that, a few weeks prior to announcing its 3Q15 results, Micron saw 14 negative revisions, and its current year consensus was also lowered at that time.
Micron stated that revenues in 3Q15 missed estimates due to sluggish demand for personal computers as well as a 10% decline in DRAM (dynamic random access memory) prices. Sluggish PC sales have affected other semiconductor companies such as Intel Corporation (INTC), Qualcomm (QCOM), and SanDisk (SNDK) as well in 2015.
Analysts downgrade Micron on August 20, 2015
Shares of Micron fell by 7.3% on August 20, 2015, after research firm Robert Baird downgraded the stock to “neutral” from “outperform.” The firm also cut Micron’s price target to $15 from $21.
Intel and Micron are NAND partners. However, on October 20, 2015, Intel announced plans to invest $5.5 billion over the next few years to convert a facility in China that will support its own 3D NAND manufacturing. Shares of Micron fell by 10.8% following the news.
Analyst estimates at the end of 2015
Out of 32 analysts covering Micron’s stock, 23 have issued a “buy” recommendation, two have issued a “sell” recommendation, and seven have issued a “hold” recommendation for Micron. The analyst stock price target for the firm is $18.23, with a median target estimate of $18. Micron is thus trading at a discount of 20% with respect to its median target.
This means that while PC DRAM prices are expected to fall in 2016, analysts still believe Micron to be a strong stock fundamentally, with reasonable debt levels and expanding profit margins. Micron constitutes 3.6% of the iShares PHLX Semiconductor ETF (SOXX).
All said, calendar 2015 has been a difficult year for semiconductor stocks. Out of 30 stocks in SOXX, 11 stocks look to be finishing in the red (in terms of YTD returns) for 2015, compared to four in 2014 and three in 2013, driven by lower demand in the personal computer (PC) segment, the fall in DRAM prices, and increases in competition.
Finally, let’s take a look at Marvell Technology’s fall in 2015.