Micron (MU) Tumbles after Guidance Comes in Way Below the Street’s Outlook

The shares of Micron (MU) are sinking 16% after the company provided significantly weaker-than-expected guidance for its current quarter. Micron develops and markets computer memory products.

In fiscal Q2, the company’s current quarter, the company expects its adjusted earnings per share to come in at $1.33 to $1.53. Analysts’ average estimate was $1.92. Similarly, Micron predicted that it would generate Q2 sales of $7.7 billion to $8.1 billion, versus the mean estimate of $9 billion. Further, it provided adjusted gross margin guidance for Q2 of 37.5%-39.5%, versus analysts’ average estimate of 41.3%.

Micron blamed the guidance misses on weak consumer-oriented markets. The company’s chips are widely utilized in PCs and cell phones.

However, CEO Sanjay Mehrotra said that the firm is  “exceptionally well positioned to leverage AI-driven growth to create substantial value for all stakeholders.”

For Q1, its previous quarter,  Micron generated adjusted EPS of $1.79, versus analysts’ mean outlook of $1.77. Additionally, its sales soared 84% year-over-year, driven by high demand for its products from data centers and the strong performance of its high-bandwidth memory offerings.

However, many banks cut their price targets on MU stock in the wake of the guidance misses.  Bank of America, for example, lowered its rating on the shares to Neutral from Buy and slashed its price target on the shares to $110 from $125.

The bank reported that there is “downward pressure” on prices for Micron’s memory products due to “weakness in PC and phone markets.”

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Disclosure: The author owns MU stock and has no plans to trade it in the next 48 hours. This article is originally published at Insider Monkey.