Needham analyst reacts to Micron Q2 earnings

By:
on Mar 29, 2023
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  • Micron Technology Inc reports its largest quarterly loss on record.
  • Needham's Rajvindra Gill reacts to its earnings print on CNBC.
  • Micron stock is now up nearly 20% versus the start of the year.

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Micron Technology Inc (NASDAQ: MU) gained slightly in extended trading on Tuesday even after reporting its largest quarterly loss on record.

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Micron’s outlook for the future

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The tech stock is keeping resilient primarily because the management said overburdened customer inventories that have been a nightmare for Micron in recent quarters were starting to show signs of improvement and that will continue through the rest of 2023.

For the current quarter, Micron forecasts $3.5 billion to $3.9 billion in revenue – roughly in line with expectations. According to Needham’s Rajvindra Gill:

They’re writing down older excess inventory, at least clearing out excess inventory. So, if we can contemplate a bottom in mid-quarter then we start to go to recovery in H2 and potentially a return to growth in CY24.

The Nasdaq-listed firm expects $1.58 of adjusted per-share loss in Q3 and non-GAAP gross margin at minus 21%.

Micron’s Q2 earnings snapshot

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  • Lost $2.31 billion that translates to $2.12 per share
  • That compared to $2.26 billion of net income a year ago
  • Adjusted loss came in at $1.91 a share as per the press release
  • Revenue tanked 53% year-on-year to $3.69 billion
  • Consensus was 67 cents loss (adj) on $3.71 billion revenue

The tech company is convinced that industry demand will pick up moving forward. Year-to-date, Micron stock is now up nearly 20%.

Micron stock has upside to $67

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Micron now expects capital spending to be capped at $7.0 billion this year – down 40%. Spending on wafer fab equipment, it added, will shrink further in 2024. On CNBC’s “Closing Bell: Overtime”, Gill added:

[Weakness] has been driven by smartphone and PC excess inventory. I think spending on accelerated computing and AI continue to be robust, and demand has been strong. Auto industrial continue to be strong.

Needham’s analyst has a $67 price target on Micron stock that suggests a 10% upside from here. The Boise-headquartered firm also confirmed today that it’ll lower its headcount by 15% to cut costs – more than its previous plan for 10%.  

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