Micron Technology’s stock received a rare “underweight” rating from brokerages due to the memory-chip maker’s heavy exposure to mobiles and PCs at a time when rising inflation forces consumers to rein in spending.
micron The shares closed at $ 71.18 (about Rs 5,530), down about 6 per cent in early trading on Friday.
“With the global economy expected to face adverse conditions, we remain concerned about Micron’s over 50 percent exposure to consumer markets such as PC, mobile and others,” Piper Sandler wrote in a note to customers. “
The brokerage also expects the company’s chip business which caters to the auto industry to suffer due to rising rates, a slowing economy and the possibility of excess inventory creation.
Piper Sandler said the dynamic random access memory (DRAM) market, which represents more than 70 percent of the company’s total revenue, had already begun to see prices drop for most configurations.
Micron’s DRAM chips are widely used in data centers, personal computers, and other equipment.
Market research firm Counterpoint reported in April that global PC shipments were down 4.3 percent in the first quarter of 2022, as the war in Ukraine and China’s lockdowns strained already fragile supply chains and added to component shortages.
According to IDC, global smartphone shipments are expected to decline by 3.5 percent this year.
“While we think the company has done an excellent job of reducing its cost structure and staying financially disciplined, we view memory as a largely commodity market compared to the rest of our universe. As a result, we think Micron is likely to underperform,” Piper Sandler said.
However, the brokerage expressed confidence in the company’s data center business, which represents less than 30 percent of revenue.
This lowered Micron’s price target from $20 (approximately Rs 1,550) to $70 (approximately Rs 5,440).
© Thomson Reuters 2022