Tensions between the U.S. and China over critical technology may be weighing on chip maker
Micron Technology,
but that hasn’t stopped the stock from rising after better-than-expected earnings late Wednesday and a meaningful upgrade.
Micron (ticker: MU), a leader in dynamic random-access memory and flash memory chips, posted earnings for the May quarter ahead of Wall Street’s estimates, with an adjusted loss of $1.43 per share not as bad as the $1.61 loss forecast by analysts.
The results have helped the stock climb 3.8% in U.S. premarket trading on Thursday, even as the company revealed how its China woes will weigh on its outlook.
Chip makers have found themselves at the heart of a tech Cold War between the U.S. and China—which ramped up on Wednesday after a report that the White House is considering new export rules that would hit
Nvidia
(NVDA) sales to China. In May, Beijing banned sales of some Micron products to key customers, which the group said Wednesday “is a significant headwind that is impacting our outlook and slowing our recovery.”
Nevertheless, analysts are so far looking past those pressures—with one previously pessimistic team upgrading the stock after earnings. Led by Harsh V. Kumar of Piper Sandler, the analysts upgraded Micron to Neutral from Underperform on Thursday, raising their price target to $70 from $45. Micron stock closed at $67.07 on Wednesday. Piper Sandler is on the more bearish side, since the average rating on Micron among more than 30 analysts surveyed by FactSet is Buy.
“Our upgrade is primarily based on improving end-market inventory conditions with a potential improvement in volumes and pricing in the second half of 2023,” Kumar wrote in a note. “We firmly believe that the stock has already bottomed, and in short order of six months or so we expect tailwinds to be behind Micron.”
That should help keep investors optimistic, even if U.S.-China tensions continue to hang over the stock. And even if they do, other analysts are optimistic that the chip maker will be able to tap a diverse global base of customers to get over the hump.
“While Micron stressed that there is uncertainty around the extent of recent [Chinese regulatory] restrictions, management is confident in its ability to ‘flex up’ market share at key global customers to make up for share losses in the region,” Deutsche Bank analyst Sidney Ho said in a Wednesday note.
Write to Jack Denton at [email protected]
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