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Micron Stock Falls on Weak First-Quarter Earnings and Guidance

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Micron’s stock reacts to the latest earnings

On December 18, pure-play memory chip maker Micron Technology (MU) reported its fiscal 2019 first-quarter earnings after the market close. The company’s revenue and guidance missed analysts’ estimates, sending the stock down 9% to a new 52-week low of $31.05 in the after-hours session. The stock was already trading near its 52-week low of $33.6 over fears of a memory market downturn, and Micron’s earnings fueled these fears.

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Micron lowered its industry demand outlook for DRAM (dynamic random access memory) and NAND (negative AND). It also cut is fiscal 2019 capital spending on WFE (wafer fabrication equipment) by $1.5 billion to adjust to the weak demand environment, sending the stock of its equipment supplier, Applied Materials (AMAT), down 2.6% in after-hours trading.

First-quarter earnings highlights

In the first quarter of fiscal 2019, Micron’s revenue fell 6% sequentially but rose 16% YoY to $7.9 billion, lower than the analyst estimate of $8 billion and on the lower end of its guided range of $7.9 billion to $8.3 billion. Revenue fell sequentially as DRAM customers stocked up excess inventory, which reduced order volume for Micron. The company earns 68% of its revenue from DRAM.

Its non-GAAP (generally accepted accounting principles) EPS fell 16% sequentially, but rose 21% YoY to $2.97, beating the consensus estimate of $2.95. The rise is because of the company’s $1.8 billion stock buyback during the quarter, which was accretive to EPS.

Micron stated that the excess customer inventory would reduce memory demand in the coming quarter. Thus, it expects its fiscal 2019 second-quarter revenue to fall 18% YoY and 24% sequentially to $6 billion at the midpoint, down more than $1 billion from analysts’ estimate of $7.3 billion. It expects memory demand to pick up in the second half of fiscal 2019 as seasonal sales pick up.

Given the earnings figure, there doesn’t seem to be much upside for Micron at least for the next three months.

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