Demand for personal computers and cellphones is waning, which might put downward pressure on DRAM chip prices.
Micron Technology, the memory chip behemoth, publishes profits this afternoon for its fiscal second quarter, which ended in February, despite significant headwinds for the firm and the memory sector in general.
After an outage at a plant in Japan run by a joint venture controlled by Western Digital (WDC) and Kioxia, NAND memory chip prices skyrocketed a few weeks ago. However, there are mounting fears about declining demand from the personal computer and smartphone industries, which might put downward pressure on DRAM chip prices. There are also persistent concerns about the supply chain, which are linked to both the ongoing Covid-19 outbreak (China declared a fresh lockdown in Shanghai this week) and the conflict in Ukraine.
Micron’s (MU) projection for the quarter is $7.5 billion in revenue, with non-GAAP profits of $1.95 per share. The estimate on Wall Street is $7.53 billion and $1.98 per share. The quarter is expected to bring in $1.9 billion in NAND sales and $5.5 billion in DRAM sales, according to analysts.
On a non-GAAP basis, Street consensus for the May quarter, as tracked by FactSet, calls for revenue of $8.1 billion and profits of $2.24 per share.
In a research note previewing the quarter, Citi analyst Chrstopher Danely writes that he expects February quarter results to be in line with guidance, but that the May outlook has the potential to above Street estimates. DRAM pricing is projected to rise in the second half of 2022, according to Danely, who has a Buy rating and a $120 target price on the company. This is due to low supply and recovering demand. He also points out that in late February, both Micron and Western Digital boosted NAND costs by around 10%, with spot pricing up about 3%.
Wedbush analyst Matt Bryson, who upgraded Micron’s stock to Outperform from Neutral after learning of the production problems at the Western/Kioxia joint venture, believes that memory market conditions haven’t been as strong as he had hoped. He says, “Softer PC production, handset build cuts, and less robust retail circumstances have limited the potential extent of the upwards swing we anticipated in NAND pricing, and similarly may prevent DRAM from experiencing more dramatic upticks.” Bryson, on the other hand, believes the company is still inexpensive in light of forecast profits growth.