Micron Technology Inc. shares led the semiconductor industry lower on Thursday, as a beat-and-raise earnings report failed to dispel concerns about how long memory chips will remain in high demand as supply problems in the broader sector fade. The chip maker’s quarterly results and outlook, released late Wednesday, surpassed Wall Street estimates and predicted that memory chip demand would remain robust for several quarters.
Micron MU, -5.46 percent shares, on the other hand, led the semiconductor industry lower on Thursday, with shares last down nearly 5% at $80.90, and the PHLX Semiconductor Index SOX, -1.37 percent down 0.8 percent. The S& Micron is covered by 32 analysts, 27 of whom have buy or overweight ratings, and five have hold ratings. According to FactSet data, only four of them boosted their price targets and one cut theirs, resulting in an average price target of $120.61. Read: The semiconductor scarcity is here to stay, but it will have a different impact on chip companies. Investors expected good results, according to Evercore ISI analyst C.J. Muse, who has an outperform rating and a $135 price target, adding that concerns are more “laser focused” on demand trends. “On this front, we highlight Micron’s fairly upbeat forecast, with a view for supply to remain tight for both DRAM and NAND into CY22 – though we expect investors will wait and see,” Muse added. Micron is a memory chip manufacturer that specializes in DRAM and NAND flash memory. DRAM, or dynamic random access memory, is the type of memory used in computers and servers, whereas NAND chips, or flash memory chips, are found in smaller devices such as smartphones and USB drives. Memory chips, like other semiconductors, have been in high demand during the COVID-19 pandemic, and prices have skyrocketed. Investors will recall how DRAM and NAND prices soared in 2018, only to plummet as consumers double- and triple-bought chips to lock in lower pricing, leaving chip makers with large stocks. Muse was backed up by Cowen analyst Karl Ackerman, who has an outperform rating and a $105 price target. “A beat-and-raise was better than our assessment of buyside expectations,” Ackerman said, “but the bugaboo is essentially a pause in DRAM cost reduction as some investors wrestle with where we are in the current memory cycle.” Micron is “well positioned for a good 2021, with DRAM (73 percent of revenues) and NAND supply both likely to be tight through C22,” according to Mizuho analyst Vijay Rakesh, who has a buy rating and a $107 price target. DRAM prices could flatten in the fourth quarter and then rise in 2022, according to Citi Research analyst Christopher Danley, who has a buy rating and a $135 price target. “Though recent bad DRAM market sentiment owing to pushouts in the PC/handset supply chains may have an influence on memory pricing talks in 2H,” Danley said, “our Korean memory analyst, Peter Lee, anticipates overall server DRAM demand to remain steady given a recovery in enterprise expenditure in 2H21.” Micron shares have dropped roughly 13% in the last three months, while the SOX index has risen 2%, the S&P 500 has up 7%, and the Nasdaq has risen 8%. Micron’s stock closed at $95.59 on April 12, barely shy of its all-time closing high of $96.56 established on July 14, 2000, during the company’s third quarter./n
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