Kioxia stock slips ahead of earnings: what's next for Japan's memory giant?

Kioxia Holdings stock continued its steep decline today, reaching its lowest level since May 15. It has plunged by over 60% from its year-to-date high, erasing billions of dollars in value. It has fallen from the most valuable Japanese company to fourth after Mitsubishi UFJ, Softbank, and Toyota. So, will the stock continue falling ahead of its financial results later this week? 

Kioxia Holdings has plunged amid memory jitters

Kioxia Holdings is one of the biggest companies in the memory industry. Its biggest business is NAND flash memory, which are used in smartphones and other products. It is estimated to be either number two or three in the industry alongside companies like Samsung, SK Hynix, and Western Digital.

Kioxia Holdings also sells solid-state drives, UFSs, and eMCC storage devices. It counts companies like Apple, Microsoft, and Dell as its biggest clients. These are firms that sell millions of devices globally a year. They are also large players in the booming artificial intelligence industry. 

Kioxia is not the only memory stock in a freefall. In South Korea, SK Hynix stock has plunged from a record high of 3 million won to the current 1.53 million won, its lowest level since May 7 this year. It has plunged by 48% from its all-time high.

Samsung Electronics stock has plunged by over 40% to 221,000 won. Other companies like SanDisk, Micron, and Western Digital have all plunged in the past few weeks.

One reason for this is that investors are booking profits after the stocks surged. At its peak this year, it was up by over 5,255% from its lowest level last year. It is common for a stock to retreat after going parabolic. 

Another reason is that investors are concerned about the memory sector and whether it will continue in the near term. As a result, Apple is pressing the US government to allow it to buy Chinese memory products. Such a move would help to ease the ongoing memory crunch and bring their prices lower.

Kioxia to publish its financial results

The next important catalyst to watch will be Kioxia’s first-quarter earnings that comes out on Friday this week.

The most recent results showed that Kioxia’s revenue doubled in the quarter to March 31, crossing the 1 trillion yen mark for the first time ever. Its gross profit jumped to over 665 billion yen, with its gross margin jumping to 66%. Also, the free cash flow jumped to over 241 billion yen.

Therefore, analysts predict that the company’s growth continued in the first quarter. The company’s guidance is that its revenue jumped to 1.75 trillion yen, up by 74.5% QoQ. Its operating profit is expected to jump to 1.3 trillion yen, while the net income is expected to hit 870 billion yen. The real figure will likely be better than expected.

Kioxia stock price technical analysis

Kioxia stock chart | Source: TradingView

The daily chart shows that the Kioxia Holdings stock has been in a strong freefall in the past few months. It has plunged from a record high of 113,600 yen to the current 44,550 yen today. In this, it has dropped to the 61.8% Fibonacci Retracement level. 

The stock has also dropped below the 50-day and 100-day Exponential Moving Averages (EMA), a sign that bears are in control for now. Therefore, the stock will likely remain under pressure, potentially to the 78.6% retracement level of 26,270 yen.