Micron shares plunge 14% after significant Q2 guidance miss

Investing.com -- Micron Technology Inc (NASDAQ:MU) shares plummeted more than 14% in premarket trading Thursday after the chipmaker issued second-quarter guidance well below Wall Street expectations.

The company forecast adjusted earnings of $1.33 to $1.53 per share, missing analysts’ consensus estimate of $1.97.

Revenue for the second quarter is expected to be $7.90 billion, plus or minus $200 million, significantly short of the $8.97 billion estimated by analysts.

The disappointing outlook was attributed to a pause in demand for data center SSDs, slower-than-anticipated inventory digestion, and industry oversupply of NAND memory.

Micron also flagged a weaker-than-expected outlook for second-quarter bit shipments, adding to investor concerns.

“While consumer-oriented markets are weaker in the near term, we anticipate a return to growth in the second half of our fiscal year." CEO said in the statement.

"We continue to gain share in the highest margin and strategically important parts of the market and are exceptionally well positioned to leverage AI-driven growth to create substantial value for all stakeholders.”

For the reported quarter Micron Technology's per share profit was $1.79, 6 cents better than the analyst estimate of $1.73.

Revenue of Micron, which is also an Nvidia (NASDAQ:NVDA) supplier, for the first quarter came in at $8.71 billion, ahead of the consensus estimate of $8.68 billion.

The Q1 beat was fueled by data center growth and DRAM, which grew 20% sequentially, as HBM revenues doubled over the same period.

Commenting on the report, KeyBanc Capital Markets maintained an Overweight rating on Micron stock. While disappointed with the guidance, the investment bank notes it is "encouraged by the progress and ramp of HBM3e and long-term secular industry tailwinds (content growth, AI)."

Piper Sandler analysts shared similar remarks, stressing that Micron's HBM story "remains intact," with the company positioned "to capitalize on market expansion opportunities from data center investments in 2025."

"Comments on the call indicated HBM shipments were ahead of plans in the quarter and Micron expects to recognize several billions of dollars from HBM in 2025," analysts led by Harsh V. Kumar added.

Separately, analysts at Raymond (NS:RYMD) James said despite the challenging near-term outlook, they expect DDR (NYSE:SITC) inventory to normalize in the following quarters and are "encouraged" by NAND production cuts.

"Our bull-case is predicated on HBM, which is arguably the best secular story the industry has ever seen," analysts noted. With the stock's price-to-book ratio of 2.1x in extended trading, analysts view the risk-reward profile as "attractive."

Pratyush Thakur contributed to this report.

This article first appeared in Investing.com