Categories Analysis, Technology

Micron crumbles on rating downgrade amid looming correction

The softening demand for memory chips has been a cause for concern among semiconductor companies for some time. Adding to the slump is the impact of the ongoing trade war and falling prices. According to experts, the once-booming semiconductor industry is bracing for a correction.

Even as chipmakers continue their efforts to clear excess inventory, recent developments indicate the slowdown has already set in. Taking a cue from the downtrend, Goldman Sachs (GS) Wednesday downgraded Micron Technology (MU) from Buy to Neutral, sending the stock tumbling. The rating agency attributed the downgrade to the sharp decline in the demand for memory chips, a trend that could last for several months.

According to experts, the once-booming semiconductor industry is bracing for a correction

Micron lost more than 6% in early trading Wednesday, adding to the ongoing sector-wide slump triggered by the sell-off in semiconductor stocks. Goldman analysts see the downturn extending to the upcoming quarters when sales are expected to be dragged further by the falling prices due to procurement delays.

According to the analysts, the company’s near-term profit will come under pressure from the low average selling prices, an oversupply of the NAND chips and the supply-demand imbalance in DRAM. Micron is scheduled to report its fourth-quarter results on September 20 after the closing bell. Wall Street is looking for earnings of $3.26 per share.

Chinese Court forbids Micron from selling its chips in China

Earlier, Micron took a beating after RBC Capital Markets lowered its price target on the stock and maintained the outperform rating, citing a potential squeeze on the company’s margins due to the demand slump. Last week, the stock plunged nearly 10% after a report from Morgan Stanley outlined a bleak outlook for the semiconductor industry.

Recently, the Boise, Idaho-based company revealed plans to pump in $3 billion of capital into the business and create 1,100 jobs by 2030 as part of an expansion program, mainly involving capacity expansion in the Virginia chip plant and development of an R&D center in Manassas.

Micron experienced a great deal of volatility since the beginning of the year and lost over 6% during the period. The downturn was more pronounced since mid-August, marked by a cumulative loss of about 21%. Following Wednesday’s downgrade, the stock slipped further and hovered near the $40-mark.

Why Micron stock lost its momentum today

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