© Reuters Argus won’t recommend Micron Technology even for investors aware of the risks
By Sam Boughedda
Micron Technology (NASDAQ:) shares were downgraded to Hold from Buy by Argus analysts in a research note released Friday.
The analysts told investors the downgrade reflects prospects for deep operating losses at Micron over the next few quarters.
“In fiscal 1Q23, revenue fell more than 45% from the prior year, and the company reported its first non-GAAP quarterly loss since 1Q16. Micron has been hurt by a steep falloff in smartphone and consumer electronics demand over the past several quarters,” they wrote.
They explained that the demand weakness for memory products has spread to the data center and enterprise markets, “resulting in an unfavorable environment likely to persist for multiple quarters.”
“Inventories are clogging distribution amid previous capacity increases that came in response to pandemic-induced electronics demand. Management noted that the disconnect between inventories and end-market demand is the greatest it has been in over 10 years. DRAM demand and production are particularly out of balance. Pricing has fallen sharply for all memory products as a result of the slack demand. In response, the company intends to reduce its workforce by up to 10% and slash production,” the analysts added.
“We are now modeling a sharp non-GAAP loss for FY23. MU shares are down 47% year-to-date. Despite the sharply reduced price, the uncertain timeline for a return to non-GAAP profitability clouds the outlook.”
The analysts concluded that despite the deeply discounted stock price, they can “no longer recommend MU even for investors aware of the risks of investing in memory technology, where volatile pricing tends to drive big stock swings.”
Micron shares fell over 2% in Friday’s session.