Micron's stock sentiment is weak. Here's what could flip the script.

By Emily Bary

Micron shares have shed most of their 2024 gains, but memory pricing could improve in the coming months, Citi says

Micron Technology Inc. shares have seen most of their year-to-date gains melt away, and the company's coming earnings report may not be pretty.

Citi Research analyst Christopher Danely expects the company to deliver November-quarter guidance of $8.0 billion in revenue when Micron (MU) posts results next Wednesday. That's below the $8.3 billion consensus target, and Danely says most buy-side investors he's spoken with seem to be more in line with his estimates, if not below them.

"Based on many conversations with investors this week, it appeared roughly 80% were bearish on Micron, with every hedge fund we spoke with being bearish but a few mutual funds being bullish," he wrote in a Friday note to clients.

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That's a change from earlier in the year, when Micron's stock was a hot play due to expected artificial-intelligence tailwinds. Micron makes high-bandwidth-memory products, among other offerings, and HBM was seen as crucial to AI.

But as a memory provider, Micron is beholden to industry trends, and the stock has fallen recently as pricing expectations for dynamic random-access memory have come down. "We continue to believe Micron stock will mirror DRAM pricing expectations for [the fourth quarter]," Danely wrote.

In his view, "the stock will remain weak until DRAM pricing reverses" - but he also thinks that could happen in a three- to six-month time frame.

Bears, he acknowledged, are more sour on the outlook for memory pricing. He said that his recent investor chats turned up the idea that the main bearish concern on Micron shares is downbeat DRAM pricing that could extend into the second quarter of 2025, "with [calendar earnings per share] of $9.41 being cut in half due to lower demand from the PC/handset markets."

Micron shares are up 5% on the year. At their highest point of 2024, they were up 80% on a year-to-date basis and among the best S&P 500 SPX performers.

See also: Micron's stock drops as first 'death cross' in 2 years appears

-Emily Bary

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09-20-24 1509ET

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