Micron stock (NYSE: MU) is trading lower in US premarkets price action today after it missed earnings estimates for the fiscal first quarter of 2023. Its guidance was also below what the markets were expecting.
Micron reported revenues of $4.09 billion in the quarter that ended on December 1. To put that in perspective, it posted revenues of $7.69 billion in the corresponding quarter last year. The revenue also fell as compared to the previous quarter when it reported sales of $6.64 billion. The company’s revenues also trailed analysts’ estimate of $4.13 billion.
Micron posted an adjusted loss per share of 4 cents which was wider than the 1 cent which analysts were expecting. In the corresponding quarter last year, it posted an EPS of $2.16. the company’s gross margin also contracted from 46.4% to 21.9% over the period.
Commenting on the earnings, Micron CEO Sanjay Mehrotra said, “Micron’s strong technology, manufacturing and financial position put us on solid footing to navigate the near-term environment, and we are taking decisive actions to cut our supply and expenses.”
He added, “We expect improving customer inventories to enable higher revenue in the fiscal second half, and to deliver strong profitability once we get past this downturn.”
Micron Misses Sales and Profit Estimates, Announces Layoffs
Micron missed both sales and profit estimates in the fiscal first quarter. Its guidance also fell short of estimates. At the midpoint, it forecasted sales of $3.8 billion in the current quarter which was below the $3.88 billion that analysts were expecting. It forecasted a per-share loss between 52 cents to 72 cents which is wider than the 29 cents per share loss that analysts were expecting.
Meanwhile, amid the ongoing slump in PC sales, Micron would adjust its supply and announced that it would cut around 10% of its workforce. It announced several other measures to control its cash outflow. These include cutting executive salaries, skipping bonuses, and suspension of share buybacks.
Meanwhile, Micron expects NAND demand to rise by 20% and DRAM’s by 10%. Mehrotra said, “For both years, demand in DRAM and NAND is well below historical trends and future expectations of growth largely due to reductions in the end demand in most markets, high inventories at customers, the impact of the macroeconomic environment and the regional factors in Europe and China.”
MU to Adjust Supply amid Industry Slowdown
Micron CFO Mark Murphy said, “The largest impact to the profitability and financial outlook for us is the supply-demand balance, and the rate and pace of this improvement is going to be a function of aligning supply with demand, and we’re taking decisive actions on CapEx and utilization to address it.”
That said, peers like Samsung would also need to cut supply in order to restore the demand-supply balance in the industry.
Higher inflation and economic slowdown have taken a toll on PC sales. US stocks, especially growth stocks, have crashed this year amid higher inflation However, there are some investments that can outperform during inflation.
Micron was among the major earnings that markets were awaiting this week. On Monday, both FedEx and Nike reported their earnings which were better than feared. While FedEx missed revenue estimates, it bumped up its cost-cut program which pleased markets.
Recession fears have led to a sell-off in US stocks. Digital assets have tumbled too amid the risk-off environment. We have a guide on whether crypto is recession-proof.
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