Why Everything is Going Wrong for Micron Stock?

Micron Technology is currently in choppy waters due to a very uncertain supply and demand dynamics in the market. Analysts believe that the company overestimated server NAND and DRAM demand last year, which resulted in inventory surplus in 2020. The coronavirus crisis worsened the situation for the chips company.

Weak Outlook

The future for the industry does not pain a positive picture. According to estimates by DRAMeXchange, prices of DRAM in the third quarter of 2020 will either be flat or down, mainly due to high inventory at server OEMS and slowing demand in enterprise servers. According to Semiconductor research firm IC Insights, DRAM suppliers are poised to cut capex by 20% year over year in 2020.

Soft Price Trends

Investment firm Mizuho recently lowered Micron Technology’s price target to $58 from $63, citing soft pricing trends in the coming months. The firm said in a note that the demand for Micron Technology products in the enterprise domain is going to be slow, even when growth in Cloud and smartphone remain strong. The firm also expects "modestly softer" gross margins through the end of the year.

However, the company sees a rebound for Micron Technology in 2021 because of the upcoming 5G boom Mizuho maintained a Buy rating on Micron Technology. Micron Technology is frank about the situation. The company’s CFO David Zinsner recently said that Micron Technology’s fiscal first quarter revenue will be lower than expectations. However, the company expects strong growth and rebound in the long term. Earlier this month, Deutsche Bank downgraded Micron Technology to Hold, citing supply-chain problems and growth concerns in the coming months.