The recent decline in Micron stock
So far, we’ve seen that Micron (MU) has been positioning itself as a specialized memory solutions maker. However, this is a long-term strategy, and the company has not been able to address investors’ short-term concerns.
Micron and its equipment supplier KLA-Tencor (KLAC) presented a weak short-term forecast for the memory market at the Citi 2018 Global Technology Conference on September 6. That saw the two stocks fall 9.5% and 12.3%, respectively, between September 6 and 7. Equipment supplier Applied Materials (AMAT) stock fell 7%. These significant falls sent the iShares PHLX Semiconductor ETF (SOXX) down 3%.
Why are investors going bearish on Micron?
At the Citi conference, KLAC’s CFO Bren Higgens stated that the company is reducing its guidance for the second half of 2018 shipments from mid-single-digit growth to flat or single-digit declines. That guidance comes as the company is seeing weak memory-related shipments with little signs of recovery.
Even Micron’s CFO David Zinsner stated at the Citi conference that NAND (negative AND) prices declined in Q3 2018. A weaker guidance by the two CFOs made some analysts bearish on Micron.
Baird removed Micron from the list of top semiconductor large-caps due to concerns that the company’s gross margin has reached its peak and would fall at this point as DRAM (dynamic random access memory) and NAND prices fall and inventory increases.
Micron’s non-GAAP gross margin rose from 48% in fiscal Q3 2017 to 60.9% in fiscal Q3 2018. Investors were betting on that gross margin. Concerns that the margin has peaked made investors wary that the memory upcycle has come to an end, which put investors on a sell mode.
Next, we’ll look at Micron’s technical indicators.