In advance of the crucial holiday shopping season, Micron Technology’s (MU) quarterly earnings report will offer some hints regarding consumer demand. Last month, Micron stunned the market by announcing that shipments of its memory chips would be slowed down due to the fast declining demand for computers. As a result, Micron stock has lost more than 45% of its value this year and only last Friday hit a 1-and-a-half year low.
The market will pay close attention to Micron’s projection of future growth, particularly in light of today’s news from Apple (AAPL), which suggested that the prognosis may have become worse. According to a recent Bloomberg story, Apple will abandon its plans to increase iPhone production this year after a predicted jump in demand did not occur.
Analysts have decreased their forecasts for Micron’s earnings and sales by 12% and 6.9%, respectively, over the last three months. Analysts anticipate an 18% reduction in revenue for the fourth quarter that concluded on August 31, which would be the first decline in revenue in 10 quarters. The difficulties facing Micron are likely to spread throughout the chip manufacturing sector. Comments regarding further sales declines may have an impact on manufacturers of the machinery used to fabricate semiconductors, including Applied Materials (AMAT) and Lam Research (LRCX).
Chip stocks have experienced a greater selloff than the rest of the technology industry due to worries about an impending recession. For instance, the Philadelphia Semiconductor Index ($SOX), which is down -41% from its record high finish in December and is down roughly -40% this year, hit a new low for the year on Monday. The Nasdaq 100 Stock Index ($IUXX) (QQQ) is only down -31% for the year, in contrast.
The decline in chip stock prices this year has brought valuations down to almost bargain levels. Micron is being offered for sale for 1.1 times book value and 11 times projected earnings for the upcoming year. But given that rising interest rates are predicted, the company’s earnings projections might still be too optimistic. Synovus Trust said, “Micron is definitely undervalued from a historical perspective, but it can still go lower.”
This article was originally posted on barchart.com