Micron Technology’s stock received a rare “underweight” rating from a brokerage due to the memory chip maker’s high exposure to cellphones and PCs at a time when rising inflation is forcing consumers to rein in spending.
Micron shares fell about 6 percent to $71.18 (about Rs. 5,530) during early trading on Friday.
“With the global economy expected to face headwinds, we are concerned about Micron’s more than 50 percent exposure to consumer markets such as PCs, mobile and others,” Piper Sandler wrote in a note to customers.
The brokerage also expects the company’s chip business, which focuses on the auto industry, to suffer from rising rates, a slowing economy and the possibility of excess inventory build-up.
Piper Sandler added that the Dynamic Random Access Memory (DRAM) market, which accounts for more than 70 percent of the company’s total sales, has already begun to see price drops for most configurations.
Micron’s DRAM chips are widely used in data centers, PCs and other devices.
Market research firm Counterpoint reported in April that global PC shipments were down 4.3 percent in the first quarter of 2022 as the war in Ukraine and lockdowns in China put pressure on already fragile supply chains and exacerbate component shortages. made.
According to IDC, global smartphone shipments are expected to decline by 3.5 percent this year.
“While we believe the company has done a great job reducing its cost structure and staying financially disciplined, we continue to view memory as largely a commodities market compared to the rest of our universe. As a result, we believe Micron is likely to underperform” said Piper Sandler.
However, the brokerage expressed confidence in the company’s data center operations, which represent less than 30 percent of revenue.
It lowered Micron’s price target by $20 (about Rs. 1,550) to $70 (about Rs. 5,440).
© Thomson Reuters 2022