executives said late Wednesday at a BMO Capital Markets chips conference that the company wouldn’t be able to ship to Huawei after Sept. 14, which caused at least two analysts to lower their target prices on Thursday.
Shares of Micron (ticker: MU) fell 0.8% to $44.92 on Thursday, as the
Dow Jones Industrial Average
gained 0.6%. The stock has fallen 13% in the past month, compared with a 3% gain for the
PHLX Semiconductor index.
Micron’s disclosure that U.S. restrictions will prevent the company from shipping semiconductors to Huawei is a blow to the Boise, Idaho, company. It could affect 10% or more of the company’s overall revenue, according to BMO Capital Markets analyst Ambrish Srivastava’s estimates.
The blow is especially severe because it usually takes about four months in the supply chain for chips to arrive to a customer. The U.S. Commerce Department regulations issued Aug. 17 give Micron until Sept. 14 to halt chip sales to Huawei, suggesting it must reroute chips already destined for sale.
Srivastava wrote in a Thursday note to clients that he expects Micron to recoup some of the losses. He said the new regulations will result in a 4% drop in revenue from the loss of Huawei sales in the fiscal first quarter. Srivastava lowered his target price to $55 from $47 and maintained his Hold rating.
There may be further risk to the stock because of geopolitical tension between China and the U.S., according to a Thursday note from Citi Research analyst Christopher Danely. Micron also supplies closely held Bytedance, the owner of TikTok, and
which has a stake in the closely held maker of Fortnite and Epic Games. Though neither Bytedance nor Tencent are as large as Huawei, Micron revenue could take a further hit if it is prevented from selling chips to those companies.
Danely has a Sell rating on the stock with a $35 target price.
Wall Street mostly likes Micron stock, with 25 analysts placing a Buy rating on it. Seven analysts rate the stock a Hold and only Danely rates it a Sell. The average target price is $62.11, which represents an upside of about 40% from Thursday’s intraday price.
Micron also said at the BMO conference that it was expecting a weaker second half, compared with the first half. In part, Chief Business Officer Sumit Sadana said, the company is tempering expectations because demand from large businesses purchasing computers isn’t as great, in large measure because of economic conditions related to the Covid-19 pandemic.
Although Danely said in his note that demand for dynamic random access memory is expected to decline over the next two to three quarters, there are bright spots ahead for Micron.
Write to Max A. Cherney at [email protected]