Micron slips; Argus cites potential for 'deep operating losses'
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Micron Technology (NASDAQ:MU) shares gave up more than 2% Friday as Argus Research downgraded the memory chipmaker due to the potential for "deep operating losses" in its future.
Analyst Jim Kelleher, who cut his rating on Micron (MU) to hold from buy, noted the company is likely to see further weakness for memory chips, especially for smartphones, and that weakness is likely to move into other parts of tech, such as data centers.
Kelleher added that the weakness could result in Micron (MU) facing an "unfavorable environment [that is] likely to persist for multiple quarters."
Earlier this month, Micron (MU) reported fiscal first-quarter results that were slightly lower-than-expected and issued an exceptionally weak outlook for its second quarter. Micron (MU) now expects to lose between 52 cents and 72 cents a share, excluding one-time items, on revenue in a range of $3.6B to $4B.
The company also noted it would cut almost 5,000 workers in the year ahead as it is "significantly reducing" its capital expenses in an conserve cash amid a weakening global economy.
In a statement, Micron (MU) Chief Executive Sanjay Mehrotra said the company is "taking decisive actions to cut our supply and expenses" and that it expects improvements in customer inventories to improve and enable revenue to start growing in the second half of next year.
Mehrotra added that he believes Micron (MU) will be able to "deliver strong profitability once we get past this downturn."
Micron (MU) added that "over the next few months", it expects "gradually improving demand trends for memory as customer inventory levels improve further, new CPU platforms are launched, and China's demand starts to grow as its economy reopens."
Still, even with Micron's (MU) negative near-term outlook, investment firm UBS recently named the company as one of its top chip stocks for 2023.
Analysts are largely cautious on Micron (MU). It has a HOLD rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates MU a HOLD.