Micron Technology (MU) shares tumbled nearly 17% on Thursday, falling to their lowest levels since September, after the company issued a dire forecast for its fiscal second quarter.
The memory chipmaker projected revenue between $7.7 billion and $8.1 billion, well below Wall Street’s expectations, alongside adjusted earnings per share (EPS) in the range of $1.33 to $1.53. Both figures reflect a significant slowdown compared to its first-quarter performance, which saw revenue jump 84.3% year-over-year to $8.71 billion.
The weaker guidance underscores a pronounced slowdown in consumer-driven markets, including PCs, smartphones, and automotive, which offset continued strength in AI-related demand. Analysts have expressed concerns that these challenges, coupled with macroeconomic headwinds, could weigh heavily on Micron's recovery trajectory.
AI Demand Shines Amid Broader Weakness
Despite the bleak outlook, AI-driven markets provided a silver lining. Micron reported robust growth in its data center and high-bandwidth memory (HBM) segments, with HBM revenue more than doubling sequentially in Q1. These memory chips, integral to AI workloads, have become a core growth driver, now accounting for over half of Micron's total revenue.
The company raised its total addressable market (TAM) forecast for HBM, estimating it to surpass $30 billion by 2025, up from $25 billion just a quarter ago. This optimism reflects the increasing complexity of AI training models, which demand higher memory capacity and speed.
However, these gains were insufficient to counterbalance weak demand in traditional markets. PC volume growth is expected to remain flat in 2024, while smartphone and automotive sectors face sluggish recovery timelines, with bit shipments likely weighted toward late fiscal 2025.
Market Reaction and Analyst Downgrades
The disappointing guidance prompted swift downgrades from analysts. Bank of America (BAC) lowered its rating on Micron to "neutral" from "buy" and slashed its price target to $110 from $125, citing pressure on memory pricing due to weak PC and smartphone markets. Similarly, Citi (C) reduced its earnings and revenue estimates for fiscal 2025 and 2026, although it maintained a "buy" rating.
The disappointing guidance prompted swift downgrades from analysts. Bank of America (BAC) lowered its rating on Micron to "neutral" from "buy" and slashed its price target to $110 from $125, citing pressure on memory pricing due to weak PC and smartphone markets. Similarly, Citi (C) reduced its earnings and revenue estimates for fiscal 2025 and 2026, although it maintained a "buy" rating.
Wedbush Securities offered a slightly more optimistic take, maintaining its "outperform" rating and $125 price target, asserting that the challenges facing Micron are likely temporary. However, investors remained skeptical, with shares closing at $85.80, down 17%, marking one of the steepest declines among S&P 500 stocks.
Outlook: Challenges Ahead
Micron expects its consumer-facing segments to recover in the latter half of fiscal 2025, but near-term headwinds in PCs, smartphones, and automotive markets create significant uncertainty. While AI adoption continues to buoy its data center business, the broader memory market remains under pressure from oversupply and cautious consumer spending.
For investors, the mixed performance highlights the dual nature of Micron's business: a promising future tied to AI, tempered by ongoing struggles in legacy markets.
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