Needham analyst reacts to Micron Q2 earnings

Micron Technology Inc (NASDAQ: MU) gained slightly in extended trading on Tuesday even after reporting its largest quarterly loss on record.

Micron’s outlook for the future

The tech stock is keeping resilient primarily because the management said overburdened customer inventories that have been a nightmare for Micron in recent quarters were starting to show signs of improvement and that will continue through the rest of 2023.

For the current quarter, Micron forecasts $3.5 billion to $3.9 billion in revenue – roughly in line with expectations. According to Needham’s Rajvindra Gill:

They’re writing down older excess inventory, at least clearing out excess inventory. So, if we can contemplate a bottom in mid-quarter then we start to go to recovery in H2 and potentially a return to growth in CY24.

The Nasdaq-listed firm expects $1.58 of adjusted per-share loss in Q3 and non-GAAP gross margin at minus 21%.

Micron’s Q2 earnings snapshot

• Lost $2.31 billion that translates to $2.12 per share
• That compared to $2.26 billion of net income a year ago
• Adjusted loss came in at $1.91 a share as per the press release
• Revenue tanked 53% year-on-year to $3.69 billion
• Consensus was 67 cents loss (adj) on $3.71 billion revenue

The tech company is convinced that industry demand will pick up moving forward. Year-to-date, Micron stock is now up nearly 20%.

Micron stock has upside to $67

Micron now expects capital spending to be capped at $7.0 billion this year – down 40%. Spending on wafer fab equipment, it added, will shrink further in 2024. On CNBC’s “Closing Bell: Overtime”, Gill added:

[Weakness] has been driven by smartphone and PC excess inventory. I think spending on accelerated computing and AI continue to be robust, and demand has been strong. Auto industrial continue to be strong.

Needham’s analyst has a $67 price target on Micron stock that suggests a 10% upside from here. The Boise-headquartered firm also confirmed today that it’ll lower its headcount by 15% to cut costs – more than its previous plan for 10%.