On Thursday, Citi released a report detailing negative implications for the U.S. semiconductor equipment industry, following Micron Technology (NASDAQ:MU)'s recent financial disclosures.
According to InvestingPro data, Micron, a prominent player in the Semiconductors & Semiconductor Equipment industry with a market capitalization of $115.2 billion, is currently trading near its Fair Value. The company's stock has shown resilience with a 22% gain year-to-date, despite recent market volatility. Micron reported its November quarter (Nov-Q) capital expenditures (capex) at $3.1 billion, lower than the anticipated $3.4 billion by the Street.
The company also provided guidance for the February quarter (Feb-Q), projecting capex at $3 billion, which is below the Street's expectation of $3.3 billion. However, for the fiscal year 2025, Micron's forecasted capex of $14 billion is in line with the Street's projections of $13.6 billion. With a current ratio of 2.64 and moderate debt levels, InvestingPro analysis indicates the company maintains strong liquidity to support its capital investments.
Citi's analysis comes after Micron's announcement of a reduction in NAND capital expenditure due to a slowdown in technology transitions, driven by weak consumer demand and a moderation in demand for enterprise solid-state drives (eSSD) in data centers. Micron's comments regarding their focus on leading-edge DDR5/HBM DRAM, while leaving the legacy DDR4/LP4 mobility market to domestic Chinese memory makers, were highlighted as a potential risk factor for a prolonged downturn in the memory sector.
The report further elaborated on the risks associated with potential U.S. equipment restrictions, particularly if ChangXin Memory Technologies (CXMT) – currently not on the entity list and planning to add DDR5 capacity next year – is partially or completely cut off. Additionally, the absence of a significant new application for AI in personal computers by 2025 could also contribute to the industry's challenges.
Citi's assessment aligns with their recent revision, which saw a 5% year-over-year decrease in 2025 worldwide front-end equipment (WFE) spending estimates, with NAND spend expected to remain flat year-over-year. This is attributed to the delay in technology migrations to 200+ layers across all memory manufacturers. The report reflects concerns over the semiconductor equipment sector's outlook, tied closely to Micron's strategic decisions and broader market demand trends.
Despite these challenges, InvestingPro data shows analysts expect significant sales growth of 52% for fiscal year 2025, with projected earnings per share of $9.01. For deeper insights into Micron's financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers, which covers over 1,400 US equities with detailed analysis and actionable intelligence.
In other recent news, Micron Technology's earnings and revenue results have been the subject of several adjustments by financial analysts. Despite a dip in F2Q outlook, KeyBanc maintained an Overweight rating on the company, emphasizing Micron's strong F1Q performance and impressive year-over-year revenue growth.
Needham, while holding its Buy rating, reduced the stock's price target to $120, citing softer demand in consumer markets and data center solid-state drives. Other firms including JPMorgan, Wolfe Research, and Stifel also adjusted their price targets for Micron to $145, $175, and $130 respectively.
Micron's High Bandwidth (NASDAQ:BAND) Memory (HBM) revenue more than doubled quarter over quarter, leading to an increase in the Total (EPA:TTEF) Addressable Market (TAM) estimate for HBM to over $30 billion by 2025. Despite challenges in the NAND sector, the company's data center DRAM segments are projected to remain robust. These recent developments reflect a mixed but generally optimistic outlook for Micron's future.
Bernstein maintained its Outperform rating on Micron shares, while JPMorgan revised its price target for Micron, reducing it to $145 from $180, but keeping an Overweight rating. Wolfe Research also adjusted its price target for Micron to $175, with all firms maintaining a positive outlook. These adjustments highlight the potential of HBM as a significant growth driver, and the stability of server DRAM.
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