Why Micron Technology, Inc. (NASDAQ: MU) stock is crashing

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Micron Technology, Inc. (NASDAQ: MU) stock lost over 8.3% on December 19th, 2018 pre market session (Source: Google finance) after the company posted mixed results for the first quarter of FY 19, citing a market glut of memory chips as consumer and business demand for phones and computers is weakening.

As the company enter calendar 2019, the company are seeing weakening demand from the customers. As a result, the company are taking decisive actions, including a meaningful reduction in the fiscal 2019 CapEx plan, in both DRAM and NAND that will materially reduce the supply bit growth.

In NAND, the company continue to lead with the QLC product offerings, and have introduced both consumer QLC and VME SSDs and enterprise QLC SATA SSDs. In DRAM, the company introduced the 1Y nanometer 12-gigabit low power DRAM which offers the highest density available for the mobile market. In NAND, high-value solutions now represent over 50% of our NAND bits

In the first quarter, MU has achieved crossover of 1X nanometer DRAM shipments, and started revenue shipments of 1Y nanometer products. The 1Y year ramp is ahead of schedule, and the company remain on track for meaningful production by the fiscal third quarter. The company is also making excellent progress on the 1Z technology, which leverages the leadership in advanced materials and cost effective lithography techniques.

MU in the first quarter of FY 19 has reported the adjusted earnings per share of $2.97, beating the analysts’ estimates for the adjusted earnings per share of $2.96. The company had reported the adjusted revenue growth of 16 percent to $7.91 billion in the first quarter of FY 19, missing the analysts’ estimates for revenue of $8.02 billion.

The company expects the revenue to be in the range of $5.7 billion to $6.3 billion for its fiscal second quarter and gross margins of 50 to 53 percent, compared to analysts’ estimates of $7.3 billion and 55 percent, according to I/B/E/S data from Refinitiv.

Meanwhile, Micron expects the industry output, including from South Korean rivals Samsung Electronics Co Ltd and SK Hynix, to outstrip demand from the makers of phones, PCs and servers, pushing down Micron chip prices. Samsung had already warned of a slowdown in demand and drop in chip prices, flagging an end to a two-year boom in memory chips as global demand for mobile and other electronics devices wanes and fresh supplies from Hynix and Toshiba Corp hit the market. Hynix has also offered a downbeat outlook.

 

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