Barclay's Doesn't Expect Micron To Return To Profitability Until 2H 2017; Stock Drops >8%

Micron Technology, Inc. MU reported a roughly in-line quarter for CQ2, while issuing its CQ3 guidance well below expectations, guiding to a third successive quarter of losses.

Barclays’ Blayne Curtis maintains an Overweight rating on the company, with a price target of $14.

Return To Profitability

“Despite meaningful progress on DRAM bit sales and cost/bit, continued ASP declines dragged down results and guidance,” Curtis explained.

Micron Technology announced a restructuring plan that was expected to lead to savings of $80 million per quarter during FY17, split 50.50 between opex and COGs.

Related Link: Brean Capital Bullish On Micron Technology Despite Disappointing Quarter

However, the analyst does not expect a significant decline in spend in FY17 despite this plan.

“Despite the challenging results and guidance, there is some room for hope as MU expects to show meaningful progress on both bit output and cost in the 2H as 20nm DRAM and 3D NAND ramp, and DRAM spot prices are actually trending higher,” Curtis mentioned.

Curtis does not expect the company to return to profitability until 2H17.

Results And Guidance

Micron reported its revenue for CQ2 slightly below consensus, although DRAM revenues increased due to better bit volume. NAND revenues fell due to bits sold failing to keep pace with cost declines.

Gross margins were also below consensus, offset by lower opex, while the CQ3 revenue guidance came in well below consensus.

The gross margin guidance was also below expectations, while the opex guidance was higher than expected, driven by product pre-qualification expenses.

At Time Of Writing...

Micron Technology was down 8.94 percent on the day, trading at $12.53.