Micron Technology Inc. (MU.O), based in Boise, Idaho, produces many forms of semiconductor devices, including dynamic random-access memory, flash memory, and solid-state drives. It’s coping with increased competition in the market for these ubiquitous devices. How will the trend affect Micron?
For a while, the semiconductor industry was struggling with overcapacity and depressed prices. Prices still do not seem to be rising as large players such as Samsung have entered the space and are keeping margins razor thin. Notwithstanding recent rumors swirling on a possible takeover by a Chinese company, Micron’s earnings prospects look bleak.
Micron has seen costs rise as it transitions to manufacturing more next-generation 3D NAND and DDR4 chips, but its competitors seem to be ahead of the curve. In the last quarter, Micron missed on almost every metric and that trend is likely to continue this quarter. The stock has taken a beating over the last six months and a negative 3% Predicted Surprise could be an early indicator of another earnings miss coming up.
Source: Eikon/StarMine
Sliding estimates
Analysts have been revising estimates lower for Micron over the past 90 days, and not just for earnings. Revenue and EBITDA estimates have been taken down for this quarter, the rest of the year and for next year too, signaling that analysts do not expect a quick recovery.
Source: Eikon/StarMine
Sober outlook
In fact, analysts have lowered earnings expectations for Micron by more than 50% over the past 90 days. The I/B/E/S consensus estimate calls for earnings of 37 cents per share. The SmartEstimate is slightly lower at 36 cents per share, but interestingly there are four Bold Estimates for Micron that are far below the consensus (all are below 33 cents per share with two at 30 cents per share). It looks like the best analysts are all in agreement that the company will miss earnings estimates. While the stock rose on takeover talk, earnings will likely remain poor as the company struggles to catch up to some of its larger competitors.
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