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Micron shares slide despite upbeat results

 

Thursday, September 28, 2023

Today’s headlines

What’s happening: Shares of Micron Technology fell in after-hours trading on Wednesday, following the release of the company’s fiscal fourth-quarter results.

What happened: The memory chipmaker reported stronger-than-expected revenues for its fourth quarter amid a cyclical industry downturn.

However, Micron Technology said it sees a wider loss than earlier anticipated for the first quarter.

How were the results: The Boise, Idaho-based company swung to a loss in the quarter ending August 31.

  • Sales contracted by 39.6% year-over-year to $4.01 billion, but came in higher than the consensus estimates of $3.91 billion.
  • The company reported a quarterly loss of $1.07 per share, versus year-ago earnings of $1.45 per share. The loss was lower than Wall Street expectations of $1.18 per share.

Why it matters: 2023 is proving to be a brutal year for Micron, with customers in its major markets reducing orders due to weak demand and excess stockpiles of parts.

Although the company’s sales have declined for five consecutive quarters, management said there were plans to increase production of new product lines.

The company posted operating cash flows of $249 million, versus $24 million in the previous quarter. The figure was, however, significantly short of the $3.78 billion reported in the year-ago quarter.

The company’s board declared a quarterly dividend of 11.5 cents per share.

“Our 2023 performance positions us well as a market recovery takes shape in 2024, driven by increasing demand and disciplined supply. We look forward to record industry TAM revenue in 2025 as AI proliferates from the data center to the edge,” CEO Sanjay Mehrotra said during the earnings call. Mehrotra’s comments, although upbeat, did not inspire confidence in the company’s performance in 2023.

Management guided to a loss between $1.14 and $1.00 per share for the fiscal first quarter. The figure was much worse than the estimates of a loss of 90 cents per share. This was despite the revenue guidance, of between $4.2 billion and $4.6 billion, coming in higher than market expectations of $3.97 billion.

How shares responded: Micron’s shares fell 3.6% to $65.75 in the extended trading session following the release of quarterly results. The stock has added 35% year-to-date.

What to watch: Markets will watch AI investments by the biggest tech company, as Micron’s Nand chips are used for machine learning.

The markets today

European stocks will be in focus today ahead of a basket of economic reports

Context: European markets closed lower on Wednesday, as investors continued to monitor the overall health of the worldwide economy.

Details: European stocks came under pressure as investors remained concerned about the prospects of major global central banks keeping interest rates higher for a long period. Investors also remained cautious due to China’s slowing economic growth.

On the economic data front, Eurozone’s bank lending to households rose by 1% year-over-year in August, which marked the lowest rise since August 2015. Germany’s GfK Consumer Climate Indicator fell to -26.5 heading into October, versus -25.6 in the prior month.

The STOXX Europe 600 Index fell 0.18% to close at 446.91 on Wednesday, recording losses for the fifth straight session and notching its weakest close since March 28. The benchmark index for European stocks is on track to recording its first quarterly loss in four quarters.

Insurance stocks were among the worst performers on Wednesday, while oil and gas stocks bucked the overall market trend, closing higher by around 1.6% amid surge in crude prices.

London’s FTSE 100 fell 0.43% to settle at 7,593.22, its lowest close since September 8. Germany’s DAX 40 fell 0.25% to 15,217.45, while France’s CAC 40 lost 0.03% to close at 7,071.79.

Italy’s FTSE MIB Index lost around 0.3% on Wednesday, after a minister said the government will reduce their 2023 growth projections to 0.8% from a prior forecast of 1%.

What to watch: Investors await the release of reports on economic sentiment indicator, industrial sentiment, services sentiment and consumer confidence indicator from the Eurozone today. The economic sentiment indicator in the Eurozone, which fell for the fourth straight month to 93.3 in August, is expected to decline further to 91.5 in September.

Analysts expect industrial sentiment to fall to -10.9 points in September, from -10.3 points in August, while services sentiment is projected to decline to 2.5 points in September, from 3.90 points in the prior month. The consumer confidence indicator is expected to decline by 1.8 points, from the prior month’s reading of -17.8.

Other Markets: US trading indices closed mixed on Wednesday, with the S&P 500 and Nasdaq 100 up by 0.02% and 0.24%, respectively, and the Dow Jones index down by 0.20%.

The news shaping the markets

Russia announced plans to blacklist another 23 British people over UK’s anti-Russia policy. Despite the ongoing tensions, the safe-haven US dollar index fell slightly this morning.


Australia’s retail sales grew by 0.2% in August, following a 0.5% increase in the previous month, which lent support to the AUD/USD forex pair.


New Zealand’s ANZ Business Outlook Index improved to 1.5 in September, versus August’s reading of -3.7. The figure moving to positive zone for the first time since May 2021 sent the NZD/USD pair higher in forex trading this morning.


UK’s car production declined 9.7% year-over-year to 45,052 units in August. This marked the first decline after six consecutive months of growth and exerted pressure on the GBP/USD forex pair.


The Energy Information Administration (EIA) said US crude oil inventories had declined by 2.17 million barrels in the latest week, much higher than market estimates of 0.32 million barrels, which sent the WTI crude oil prices higher this morning.

What else to watch today

Eurozone’s selling price expectations, consumer confidence price trends and ECB general council meeting, Spain’s consumer price inflation, retail sales, consumer confidence indicator and business confidence, Turkey’s economic confidence index, foreign exchange reserves and MPC meeting summary, Italy’s manufacturing confidence index, consumer confidence and producer price inflation, South Africa’s producer price inflation, Brazil’s producer prices, net payrolls and IGP-M inflation, Canada’s CFIB business barometer long-term optimism index and average weekly earnings, Germany’s inflation rate, Mexico’s unemployment rate and Bank of Mexico interest rate decision, US GDP growth rate, initial jobless claims, continuing jobless claims, corporate profits, price index for personal consumption expenditures, pending home sales, Kansas City Fed’s manufacturing production index and natural gas stocks change, Argentina’s consumer confidence indicator and current account, China’s current account, as well as Saudi Arabia’s money supply M3 and value of loans.


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