Stock leads chip sector decliners after higher OpEx view offsets raised revenue outlook
Shares of Micron Technology Inc. took a hit Tuesday, as investors appeared to focus more on the memory-chip maker’s disappointing outlook for operating expenses than the raised guidance for both its top- and bottom-lines.
The stock (MU) sank 2.6% in midday trading, enough to lead the PHLX Semiconductor Index’s SOX decliners. It was also the S&P 500 index’s SPX second-worst performer.
Micron said before the open that it now expects adjusted per-share losses of “approximately” $1.00, compared with previous guidance for a per-share loss of $1.07, plus or minus seven cents. The FactSet loss consensus was $1.04.
Revenue is now expected to be “approaching” $4.7 billion, which is above the high end of previous guidance for revenue of $4.4 billion plus or minus $200 million. The FactSet consensus was for revenue of $4.4 billion.
Micron said the improved revenue outlook is a result of “improved supply and demand balance and improved pricing.”
However, the company said it now expects adjusted operating expenses for the quarter to be approximately $990 million, well above the high end of previous guidance of $900 million plus or minus $15 million.
“[T]hose higher expenses are driven by timing of certain [research and development] program expenses, timing of certain asset sales, as well as higher incentive accruals based on the improved financial outlook for the full-year basis as well,” Chief Executive Sanjay Mehrotra said at the UBS Technology Conference, according to an AlphaSense transcript.
Evercore ISI analyst Matthew Prisco said the fact that the loss outlook was at the narrowest end of previous guidance while the revenue outlook was above the high end, given the disappointing OpEx outlook, was “likely a bit of a disappointment for investors,” especially given the strong run-up in the stock over the past few weeks.
The stock had soared 21.8% from the Oct. 26 two-month closing low of $64.53 to the 20-month closing high of $78.62 on Nov. 20. Since that high, the stock has now pulled back 4%.
So far this year, Micron shares have shot up 51%, while the PHLX Semiconductor Index has climbed 46.9% and the S&P 500 has advanced 18.7%.