Why Micron (MU) Stock Is Falling

Economic

Summary:

Discover the reasons behind Micron's recent stock decline. Explore the impact of weaker earnings, falling memory prices, and global economic uncertainties on Micron (MU) and what it means for investors.

Micron Technology, Inc. (MU), a leading player in the semiconductor industry, has been experiencing a notable decline in its stock price recently. As one of the foremost manufacturers of memory and storage solutions, Micron's performance is closely watched by investors. This article delves into the factors contributing to the recent fall in Micron’s stock price, examines related data, and explores potential implications for the company and its shareholders.

Overview of Micron Technology

Founded in 1978 and headquartered in Boise, Idaho, Micron Technology specializes in DRAM (dynamic random-access memory), NAND flash memory, and other memory and storage technologies. As a critical supplier for various electronics and computing applications, Micron's financial performance often reflects broader trends in the tech industry and global economic conditions.

Recent Performance and Stock Decline

As of early September 2024, Micron's stock has been under significant pressure, declining from its recent highs. Over the past month, the stock has fallen approximately 15%, dropping from around $75 to approximately $63 per share. This decline comes amidst a backdrop of volatile market conditions and shifting industry dynamics.

Factors Contributing to the Decline

1. Weaker-than-Expected Earnings Reports

Micron’s most recent quarterly earnings report, released in August 2024, revealed weaker-than-expected results. The company reported revenue of $6.2 billion for Q3 2024, falling short of analyst expectations of $6.5 billion. Additionally, earnings per share (EPS) came in at $1.10, below the consensus estimate of $1.25. The disappointing earnings were attributed to declining average selling prices (ASPs) for DRAM and NAND products, which have impacted profit margins.

2. Oversupply and Falling Prices

The semiconductor industry has been grappling with an oversupply of memory chips, leading to falling prices. Increased production capacity and slower demand growth have resulted in a supply glut, driving down prices for DRAM and NAND memory. For Micron, which relies heavily on these products, the falling prices have eroded revenue and profitability. According to recent industry reports, DRAM prices have dropped by approximately 20% year-over-year, exacerbating the financial strain on memory manufacturers.

3. Global Economic Uncertainty

Global economic conditions have also played a role in Micron's stock decline. Economic slowdowns, particularly in key markets such as China and Europe, have dampened consumer and business spending on electronics and technology. Trade tensions and geopolitical uncertainties have further contributed to a cautious investment environment, impacting demand for semiconductor products.

4. Competitive Pressures

Micron faces intense competition from other major players in the semiconductor industry, such as Samsung and SK Hynix. These competitors have been investing heavily in advanced technologies and expanding production capacities, which has put additional pressure on Micron’s market share and pricing power. Recent strategic moves by competitors, such as new product launches and capacity expansions, have intensified competition and affected Micron’s competitive positioning.

5. Supply Chain Disruptions

The semiconductor industry has been facing ongoing supply chain disruptions, including shortages of key materials and logistical challenges. While Micron has managed these issues relatively well, the broader impact on the industry has led to increased costs and operational challenges. These disruptions have added to the financial pressures on Micron and contributed to the stock's decline.

6. Negative Analyst Revisions

Several analysts have revised their forecasts for Micron in light of the recent performance and industry conditions. Downgrades and lower price targets from influential analysts have contributed to the negative sentiment surrounding the stock. The revisions reflect concerns about the company’s short-term profitability and growth prospects amidst a challenging market environment.

Financial Metrics

To provide a clearer picture of the factors affecting Micron’s stock, here are some key financial metrics and data points:

Q3 2024 Revenue: $6.2 billion (vs. expected $6.5 billion)

Q3 2024 EPS: $1.10 (vs. expected $1.25)

Year-over-Year DRAM Price Drop: Approximately 20%

Recent Stock Price Movement: Declined from $75 to $63 per share (down 15%)

Analyst Downgrades: Several major analysts have lowered price targets, with some reducing forecasts by up to 10%.

Implications and Future Outlook

The current decline in Micron's stock reflects a combination of internal and external challenges. The weaker-than-expected earnings, falling memory prices, global economic uncertainties, competitive pressures, and supply chain disruptions have all contributed to the negative performance.

Looking ahead, Micron will need to navigate these challenges carefully. Strategies such as cost management, innovation in new memory technologies, and adjusting production capacities could play a crucial role in stabilizing the company’s financial performance. Additionally, monitoring global economic conditions and industry trends will be important for forecasting future performance.

Investors should remain cautious and stay informed about both Micron’s financial health and broader market conditions. As the semiconductor industry continues to evolve, Micron’s ability to adapt and respond to these dynamics will be critical in determining its future stock performance.

Conclusion

Micron Technology’s recent stock decline highlights the complexities and volatility inherent in the semiconductor industry. While the company faces significant challenges, including weaker earnings, falling prices, and competitive pressures, it also has opportunities to address these issues and potentially recover. By staying abreast of industry trends and financial developments, investors can better understand the factors influencing Micron’s stock and make more informed decisions.

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Cohen

This article first appeared in Forum, The Edge Malaysia Weekly .

The notion of environmental, social and governance (ESG) criteria may appear as a recent trend to many, but its foundation can be traced back to 2004 when the United Nations Global Compact (UNGC) released its report Who Cares Wins, encouraging financial market stakeholders to adopt ESG principles for the long term, highlighting the benefits of responsible investment and the positive impact on society and the environment.

Recently, ESG has gained attention in Malaysia with the prime minister’s announcement of Budget 2024. The budget allocated significant funds to promote ESG practices in businesses by introducing various tax deductions, incentives and exemptions for companies’ ESG-related spending.

One of the reasons the Malaysian government is dedicated to promoting ESG practices is to ensure Malaysia can maintain effective access to global supply chains and markets, which are increasingly ESG-sensitive.

EU initiatives and their impact on Malaysia

In May 2024, the European Union (EU) Council approved and formally adopted the Corporate Sustainability Due Diligence Directive (CSDDD), mandating rigorous due diligence to identify and mitigate adverse human rights and environmental impacts across operations and supply chains. Malaysian companies engaging with EU markets, particularly in industries prone to issues like forced labour, must navigate these regulations carefully to avoid penalties and ensure continued market access.

Environmental

The Environmental pillar focuses on managing emissions, energy usage, water resources, waste and materials sourcing to conserve natural resources, and is primarily governed by the Environmental Quality Act 1974.

In a significant development, the Energy Efficiency and Conservation Bill 2023 was passed in April 2024, mandating companies to develop energy management systems, conduct periodic energy audits and submit efficiency reports, aiming to reduce energy wastage across all sectors.

Social

The Social pillar focuses on upholding human rights and employment standards, effective employee management, promoting diversity, equity and inclusion, ensuring occupational health and safety, consumer protection and community engagement.

Companies must address critical issues such as forced labour and child labour, guided by laws such as the Children and Young Persons (Employment) Act 1966, the Employment Act 1955, and international standards such as ILO Conventions.

Malaysia must address issues such as forced labour and employee welfare to ensure ESG compliance. Non-compliance can lead to significant business losses, particularly in markets such as the US and EU. For instance, the US Customs and Border Protection agency can issue a Withhold Release Order (WRO) against companies that violate ESG principles, banning their products from entering the US market. Such sanctions can severely impact business profits, causing greater financial damage than the cost of implementing proper compliance measures.

Another noteworthy development in June 2024 was the enforcement of the Occupational Safety and Health (Amendment) Act 2022, which increased penalties for workplace discrimination and recognised the equal importance of employees’ psychological health.

Governance

The governance pillar involves establishing a robust governance structure, implementing clear policies, managing and reporting risks transparently, preventing corruption and protecting customer privacy. This involves adherence to regulations such as the Companies Act 2016, the Malaysian Anti-Corruption Commission Act 2009, the Securities Commission Malaysia Act 1993 and so on.

Conclusion

Companies that have yet to adopt ESG practices have missed out on the opportunity to benefit from the market’s preference for ESG-compliant firms during the early adoption period of the “who cares wins” framework. However, it is not too late to seize the profitable benefits that ESG compliance can bring. As Malaysia is in the transition period to ESG regulation, early adopters stand to gain significant competitive advantages, enabling them to engage with EU and US companies, and avoid substantial future penalties and mandatory compliance costs after the transition period ends. These benefits far outweigh the investment in adopting ESG principles.

Therefore, it might be appropriate to reiterate that “who cares wins” during this transition period gives companies an opportunity to act promptly and take ESG practices seriously. Act now or miss out.

Source: The edge markets

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FXOpen

Economic

Berkshire Hathaway's (BRK.B) Class B shares surpassed $465 this week, while Class A shares exceeded $700,000, pushing the market capitalisation of Warren Buffett's company past the $1 trillion mark. This milestone makes it the first non-tech U.S. company to join the trillion-dollar club, alongside Apple, Nvidia, Microsoft, Alphabet, Amazon, Meta, and Saudi Aramco.

Buffett's success lies in his value investing philosophy, which has allowed him to build a portfolio that consistently outperforms the market. This month is no exception—while the S&P 500 (US SPX 500 mini on FXOpen) has rebounded about 9.4% from its 5 August low, Berkshire Hathaway's Class B shares have surged over 14%.

Can the price climb even higher?

Buffett's Company Hits $1 Trillion Market Cap_1

Technical analysis of the BRK.B chart reveals that:

Since mid-2023, the price has been forming an upward channel (shown in blue). On 5 August, the price attempted to break below the lower boundary but failed. The long lower wick on that day's candle indicates strong demand.

Following 5 August, a steady uptrend emerged without significant pullbacks, lifting the price to the upper half of the channel. The median line acted as support during a test (indicated by an arrow), and the RSI indicator soared into the overbought zone.

When analysing 2024 price action using Fibonacci proportions, the B→C retracement is about 0.50 of the A→B impulse. This suggests a target for the current rally could be at the 1.618 level, around $475, which aligns with the upper boundary of the rising channel.

Therefore, as the price approaches $475, the bullish trend may slow down. According to TipRanks, the target price for BRK.B shares is $477 over the next 12 months.

To stay updated on all economic events of today, please check out our Economic calendar

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FXCM

Economic

Guided by Morgan Stanley and Goldman Sachs, Intel is considering splitting its design and manufacturing units and potentially scaling back or cancelling certain factory projects. These options will be presented to the board in September.

Following a dismal earnings report, Intel's stock plunged 26% in a single day, marking its worst performance in over 50 years. The company's once-dominant market position has been severely weakened, especially as Nvidia continues to outpace it in the AI sector.

CEO Pat Gelsinger, who returned to Intel in 2021 with a bold recovery plan, has faced increasing difficulties in realising his vision. In response, Intel has announced significant cost-cutting measures, including the layoff of 15,000 employees and the suspension of its dividend, as it struggles to manage rising losses.

Despite these setbacks, Gelsinger remains optimistic about Intel's future, particularly with the upcoming launch of Lunar Lake, which he describes as a breakthrough in AI-driven PC technology. However, investor confidence remains low, with Intel's share price down nearly 60% this year. The sudden resignation of board member Lip-Bu Tan, a critical figure in Intel's turnaround efforts, has added to the company's challenges.

As Intel faces these hurdles, the decisions made in the coming months will be crucial. Whether through restructuring, divestment, or other strategic changes, the company's next moves will determine its ability to recover and remain competitive in the fast-evolving semiconductor industry.

To stay updated on all economic events of today, please check out our Economic calendar

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Kevin Du

Economic

Key Takeaways

---Despite tight monetary policy, the economy shows resilience, with decelerating inflation and a cooling labor market.

---Inflation pressures are decreasing, with goods inflation returning to normal levels, fostering confidence in continued disinflation.

---Economic growth remains steady, with GDP and final sales showing resilience and anticipated rate cuts expected to support sectors like manufacturing and housing.

With his Jackson Hole speech, Federal Reserve Chair Jerome Powell all but promised rate cuts were coming. That's cool. But it is why that matters. Is the economy struggling under tight monetary policy? Not really. Are asset markets beginning to crack and show signs of stress, causing angst among policymakers? Not really. Is inflation decelerating and the labor market cooling? Yes.

These "initial conditions" matter. The outlook for the economy and markets would be different if something were breaking. Breaking is bad. Cooling is an entirely different story.

Kansas City Fed Labor Market Conditions Index

Navigating Earnings Season: Tailwinds Of Tomorrow_1

Source: Kansas City Fed, as of 7/1/24.

Conveniently, the Kansas City Fed compiles major labor market indicators into a single, useful data series. The labor market has undoubtedly softened from its post-COVID peak. It should be noted how quickly the labor market went from Great Recession weakness to near-all-time tightness. The labor market is cooling, but it is not collapsing. Those two things can coexist.

Inflation Two Ways

Navigating Earnings Season: Tailwinds Of Tomorrow_2

Source: Bureau of Labor Statistics, as of 7/1/24.

The inflation story is not dissimilar. Inflation pressures have not magically collapsed, but-as Chair Powell made clear in his speech-it is all about confidence that the trend will continue. Confidence is different from a declaration of mission accomplished. Part of the confidence may stem from a dramatic return to normal on the goods side of inflation (commodities less food and energy). Goods inflation surged, then fell back to normal levels of deflation. Services tend to be stickier, but that has begun to fall as well.

Growth Has Been Good

Navigating Earnings Season: Tailwinds Of Tomorrow_3

Source: Bureau of Economic Analysis, as of June 2024.

Growth has held up well. There have been bumps along the way, but growth has not fallen off a cliff. GDP is useful, but final sales is a good check. Final sales strips the volatility of inventories and net exports from the calculation, and the private version goes a step further and eliminates the changes in government spending as well. Intriguingly, the quality of composition of growth over the past 18 months has been high, as evidenced by the steady growth in final sales.

All of that is to say, the rate cuts are coming without panic. The economy-as a whole-is fine. There have been headwinds. Manufacturing and housing have been rather dismal in the wake of interest rate increases. But those are also set to benefit from the shift to a less restrictive stance from the FOMC. The headwinds of yesterday may well become the tailwinds of tomorrow. We will see.

Navigating Earnings Season: Tailwinds Of Tomorrow_4

Source: Federal Reserve Economic Data (FRED), as of March 2024.

There are questions no one wants to ask. What if corporate America navigated this cycle well and the historically elevated multiples reflect management competence instead of investor euphoria? What if rate cuts are not stoking a bubble-they are extending a nominal GDP and wage mini-boom? What if investors should be worried-not by budget deficits or the fall of the dollar, but 1) that the U.S. economy has plowed through every hurdle; 2) the promised recession never materialized; and 3) COVID-19 resulted in better supply chains and a more diversified economy?

When looking to the future, there are always reasons to be fearful. Maybe it's not that bad. Maybe it's even good. Maybe it's great. The future should be embraced, not feared. There are plenty of headwinds for the U.S. economy. But those may well be the tailwinds of tomorrow.

Source: SEEKING ALPHA

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ACY

Economic

Stocks

Nvidia’s recent earnings report didn’t exactly disappoint, but it also didn’t live up to the sky-high hopes of investors. As a result, the company’s stock took an 8% hit in after-hours trading. This has added to a somewhat uneasy mood in the market, with Asian stocks experiencing slight declines. The S&P 500 also closed by 0.6%, reflecting a more cautious atmosphere among investors. Now, everyone’s eyes are on the upcoming Federal Open Market Committee (FOMC) meeting on September 18th, which could be crucial in determining whether the Federal Reserve decides on a 25 or 50 basis points rate cut, simple, a 25bp is welcoming but not a 50bp.

At the same time, the US dollar has shown a bit of weakness in the trading, although the general risk-averse vibe in global markets hasn’t drastically shifted currency movements. Currencies like the New Zealand dollar, which tend to perform well in riskier environments, are holding strong, with the New Zealand dollar leading the charge. This follows a New Zealand business confidence survey that hit its highest level in a decade. What’s notable is that the optimism in the survey persisted even after the Reserve Bank of New Zealand (RBNZ) decided to cut rates, suggesting that the economy might be in better shape than previously feared. Earlier, there were concerns that the NZD could struggle if the RBNZ tightened too much, but this latest data paints a more positive picture for the currency’s future.

A Mixed Bag in the Markets: Stocks, Currencies, and Investor Sentiment_1

One reason the US dollar is softening is the slight dip in short-term yields. The yield on the 2-year US Treasury note has continued to decline, hitting its lowest point since April of last year, largely due to the recent downturn in the stock market. After Fed Chair Jerome Powell’s speech in Jackson Hole, Atlanta Fed President Raphael Bostic hinted at a cautious stance regarding a rate cut in September, stressing the need for more data to avoid making a move that could lead to more rate hikes down the line. His comments underscore how pivotal the upcoming jobs report will be in determining the Fed’s next steps.

In Japan, the weakening US dollar has sparked a surge in demand for foreign bonds and stocks. Last week alone, Japanese investors bought ¥899 billion worth of foreign equities, and over the past four weeks, they’ve snapped up a total of ¥2,217 billion—the most since January 2023. Even more remarkable is the rush to buy foreign bonds, with a four-week total of ¥5,613 billion, setting a record since the Ministry of Finance started tracking this data in 2001. This buying spree seems to be driven by a sharp drop in USD/JPY and a renewed appetite for risk, bolstered by a generally favourable global inflation outlook. With the limited rebound in USD/JPY during these record outflows, it’s likely that Japanese banks with dollars to spare have been major buyers, while others in the market continue to heavily sell USD/JPY.

To stay updated on all economic events of today, please check out our Economic calendar

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Samantha Luan

Cryptocurrency

South Korean tech conglomerate Naver is launching its first-ever crypto wallet, Naver Pay Wallet, in partnership with the sport-focused blockchain Chiliz.

Chiliz, a layer 1 blockchain built around supporting fan tokens, said in an Aug. 29 X post that it was chosen as the inaugural blockchain for the wallet, which is available to what it reported was over 33 million Naver users.

Naver — known as “the Google of South Korea” — runs the country’s most used search engine. It was the most visited website in South Korea last month with 1.7 billion visits, according to Similarweb.

The wallet is managed by Naver subsidiary Naver Pay, which reportedly has over 97,000 merchant users.

“The Naver Pay Wallet is not aiming to become a typical crypto wallet, but a service around utility and loyalty blockchain technology,” Chiliz founder and CEO Alexandre Dreyfus told TechCrunch.

The wallet is in beta and is non-custodial — meaning users will retain their wallet’s private key — and can hold both cryptocurrencies and non-fungible tokens (NFTs).

Dreyfus said more functionality is yet to come, with planned integrations with decentralized apps (DApps), fan tokens, and a merchant loyalty program.

He added the target customers are “tech-savvy,” already use Naver Pay digitally, and are “interested in exploring blockchain technology, particularly in the realms of sports, entertainment, and digital assets.”

While the Chiliz blockchain is the wallet’s first, Dreyfus said Naver could add support for a wider range of blockchains in the future.

Naver’s crypto wallet comes a day after messaging app LINE — which the company launched in Japan in 2011 and still owns a major stake in — also moved into crypto.

LINE is set to get so-called “mini DApps” — blockchain-based applications that work within the messaging app — after the Kaia blockchain launched its mainnet on Aug. 29.

The Kaia chain was formed with the February merger of LINE’s Finschia blockchain and the Klaytn blockchain from major South Korean social app maker Kakao.