Why Micron Technology (MU) Shares Are Sliding Today

Kayode Omotosho /
2024/04/19 3:38 pm EDT

What Happened:

Shares of memory chips maker Micron (NYSE:MU) fell 5.5% in the afternoon session after major indices declined with the Nasdaq down 2.1% while the S&P 500 fell by 0.9%. Netflix reported mixed results to kick off the new earnings season. The video-streaming giant provided underwhelming sales guidance for the full year and guided for growth to decelerate in the second half of the year. Also, Netflix surprisingly announced it will stop disclosing subscriber count (starting in the first quarter of 2025), and this is contributing to the market's concerns about the business. The company's post-earnings stock decline is likely dampening the sentiment toward tech stocks. 

Also, it was a challenging week for most risk assets following news of escalating tension between Israel and Iran, which is raising concerns among investors, given the potential disruptions to business supply chains, especially in the Middle East. 

These add to the ongoing inflation worries after the March 2024 CPI (Consumer Price Index - a gauge of the average price consumers pay for goods and services) report revealed inflation came in slightly hotter than expected. On April 16, 2024, Fed Chair Jerome Powell echoed similar sentiment, adding, "The recent data have clearly not given us greater confidence and instead indicate that it's likely to take longer than expected to achieve that confidence." This suggests the Fed might not lower its policy rates as fast as anticipated in 2024, with markets pricing in fewer rate cuts for the year. 

As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. No wonder so many in the investment community are optimistic about 2024. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Micron Technology? Access our full analysis report here, it's free.

What is the market telling us:

Micron Technology's shares are somewhat volatile and over the last year have had 10 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The previous big move we wrote about was 29 days ago, when the stock gained 18.4% on the news that the company reported first-quarter results with revenue and EPS outperforming Wall Street's estimates. The topline outperformance was broad-based across business lines and product types. Notably, Micron called out strong AI server demand amid a more favorable operating environment. 

On the other hand, its inventory levels increased. Looking ahead, its revenue, gross margin, and EPS guidance of $6.6 billion, 25.5%, and $0.17 per share for the next quarter crushed analysts' projections. During the earnings release, the company declared a quarterly dividend of $0.115 per share, payable on April 16, 2024, to shareholders as of April 1, 2024. 

Following the results, there was a palpable uplift in sentiments by Wall Street analysts. Notably, Argus Research upgraded the stock's rating from Hold to Buy, citing "rising memory prices, a broad recovery in demand, and the AI-driven demand surge in [the] data center." Overall, this was a fantastic quarter that should have shareholders cheering.

Micron Technology is up 29.3% since the beginning of the year, but at $106.26 per share it is still trading 17% below its 52-week high of $128.01 from April 2024. Investors who bought $1,000 worth of Micron Technology's shares 5 years ago would now be looking at an investment worth $2,453.

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