Memory and storage chip supplier Micron (MU) is a bellwether for the semiconductor industry. When it posted a loss and cut its outlook, it sent a warning to tech investors.
Micron stock risks falling to multi-year lows in early 2023. Markets will punish Micron for its reversal in fortunes. In its first quarter, Micron posted a four-cent non-GAAP loss. Revenue fell by 46.8% to $4.09 billion. Operating cash flow plunged from $3.78 billion to $943 million.
Micron is cutting supply and expenses. It is stuck waiting for customers to clear their inventory. Its revenue will not recover until the fiscal second half of the year.
Micron bought back 8.6 million shares, spending $425 million. If MU stock falls further, the expense will prove too early. In addition, the weak outlook is worrisome. In Q2, the firm expects to lose 62 cents a share as gross margins fall to just 8.5%.
Micron’s end customer has weak demand. The PC market is very weak and could worsen. Intel has good chips for the PC market while AMD (AMD) is not competitively positioned. Server sales may slow as corporations delay their investments.
Micron will cut 10% of its workforce. This suggests a recovery is not until late next year or the year after.
