Micron Technology’s (MU.O) projection of a loss for the first quarter has raised fears of a sluggish recovery in the memory chip maker’s end-markets, such as data centers, which has caused its shares to drop by more than 5 percent in the early going of trade on Thursday.
The firm predicted on Wednesday that it would incur a loss that is more than what analysts had anticipated and that it will not return to a positive gross margin until the second half of the fiscal year 2024, which is later than what was projected on Wall Street for the first half.
Micron has been under-utilizing its production capacity to match supply with a drop in demand for memory chips that began last year. However, experts have noted that excess inventory has cleared in most end-markets, such as smartphones and personal computers. This is a positive sign for Micron.
Micron’s profit margin has been suffering since the beginning of this year due partly to the low price of memory.
The analysts at Evercore ISI wrote in a note that the route to recovery is getting off to a sluggish start.
The artificial intelligence (AI) boom is expected to increase overall prospects for the firm, anticipating “several hundred million” dollars’ worth of income from its new high-bandwidth chips intended for use in AI work over the next year. Analysts are hoping that this would boost overall prospects for the company.
Micron announced on Wednesday that it is also working toward becoming a supplier to the artificial intelligence chip giant Nvidia (NVDA.O).
The business anticipates an adjusted loss per share of $1.07 for the current quarter, significantly higher than analysts’ consensus estimate of 95 cents per share.
In contrast to its prior projection of a profit of 99 cents per share, Citigroup now anticipates that Micron would report a loss of $1.79 per share for the fiscal year 2024.
Micron’s stock dropped by approximately half the previous year as the semiconductor sector experienced a correction. Those losses have been recouped significantly, and the company’s share price increased by almost 36% in 2023 as investors looked for a comeback.
According to statistics provided by LSEG, the price-to-earnings ratio for the most recent twelve months covering Micron is minus 16.3.