Dead Ram (MU Earnings)
Micron (MU) is set to report Q3 results after the close with a conference call to follow at 4:30pm ET.
Current Capital IQ consensus stands at EPS of $0.79 on Revenue of $4.70bln.
Q4 Guidance consensus sits at $0.70 on Revenue of $4.558 bln.
Analysts have been cautious ahead of the report as channel checks have pointed towards a weak environment for DRAM pricing. This has led to downgrades from Morgan Stanley, Robert W. Baird, Longbow, and Cowen over the past couple of weeks. The company's exposure to Huawei, approximately 13% of revenues, is leading to caution around the Q4 outlook.
There are whispers of MU slipping into a loss at the end of the year which is a negative headline but not completely unanticipated.
Just like Broadcom (AVGO) a few weeks back, the idea of a second half recovery is in jeopardy.
The main question to ask here is how much of this weakness has been priced in?
MU Guidance
Q3
EPS in the range of $0.75-0.79
Revenues in the range of $4.6-5.0 bln
Gross Margin in the range of 37-40% (Q2 was 50%)
OpEx in the range of $760-810 mln
DRAM
DRAM pricing weaker than expected; Bit shipments to begin increasing in Q3; CY19 bit demand in low to mid-teens; Industry bit supply tracking in the mid-to-high teens; MU noted it was idling 5% of its DRAM wafer starts.
DRAM down 28% y/y in Q2, 30% q/q; 64% of total revs
ASPs down 30% q/q and down 28% y/y
ASPS down low 20% q/q
Shipment quantities down low double digits
NAND
Down mid 20%, Shipment increased upper single digit
Revenue down 18% q/q and down 2% y/y
Large customer weighed on the results
TECHS:
Next area of interest would be $30/share on a bad quarter.
Look for potential ripple effect in the rest of the semi’s along with AAPL.
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