Micron’s stock price momentum
Micron Technology (MU) was one of semiconductor investors’ favorite stocks back in 2016 and 2017, rising ~55% and 88%, respectively, in the years. This bullishness came as a result of rising memory prices and strong demand across all end markets, which drove Micron’s revenue, earnings, and cash flow in the double digits. This growth momentum continued in the first half of 2018, with the stock rising 40%.
In a cyclical market, what goes up must come down after reaching its peak. Micron peaked in mid-2018, when DRAM (dynamic random-access memory) and NAND (negative-AND) prices started to fall. Micron was the hardest hit by the semiconductor downturn due to weak economic demand arising from the US-China trade war.
The second half of 2018
The downturn saw Micron stock fall 45% in the second half of 2018 and 22.8% in 2018. NAND chip maker Western Digital (WDC) saw its stock fall 51% in 2018, whereas the VanEck Vectors Semiconductor ETF (SMH) fell 9.04%. The memory market underperformed the semiconductor sector, as it had exposure to the mobile, graphics, and data center markets, all of which reported declines or slowdowns in demand.
However, Micron’s earnings in the first quarter of fiscal 2019 (which ended in November 2018) weren’t much affected by the downturn, as chip makers were stocking up on inventory for holiday season sales. Most of these chip companies reported revenue declines in the fourth quarter of 2018, and because of this, the memory chips they’d stocked up for the holiday season remained unused. Micron’s customer NVIDIA (NVDA) incurred a $128 million charge for carrying an excess inventory of DRAM boards and other components in the first quarter.
Micron’s upcoming fiscal 2019 second-quarter earnings results, which are set to release on March 20, are expected to reflect the impact of the downturn. Despite industry weakness, however, MU and WDC have risen 23.7% and 33%, respectively, year-to-date on anticipation that demand will recover in the second half of 2019.
Next, we’ll see what 2019 has in store for Micron.