Micron Technology Inc. shares swung from a gain to a loss in the extended session Thursday after the memory chip maker’s outlook fell short of Wall Street estimates.
Micron MU, +2.22% shares had been up as much as 5% after hours following a strong quarterly earnings report, but were last down 7% in after-hours trading. At the close, Micron shares were up 12% for the year, compared with a 10.7% gain in the PHLX Semiconductor Index SOX, +1.17% , a 9.6% rise in the S&P 500 index SPX, +0.78% and a 16.3% gain in the tech-heavy Nasdaq Composite Index COMP, +0.98% .
On the company’s earnings conference call, Micron Chief Financial Officer Dave Zinsner forecast fiscal first-quarter earnings of $2.88 to $3.02 a share on revenue of $7.9 billion to $8.3 billion. Analysts surveyed by FactSet had expected earnings of $3.08 a share on revenue of $8.45 billion.
Shares, which had been up 4.3% after hours when the call started, swung sharply into the red right after Zinsner gave the forecast. The weak forecast was blamed in part on a shortage of central processing units going into the quarter, which causes PC makers to cut back on production and their orders of memory chips.
Zinsner also said margins will decrease sequentially as a result of new tariffs on goods imported from China.
“Our gross margins will also be impacted in the near term by the announced 10% tariff on $200 billion of imports from China, which will go into effect on Sept. 24,” he said Thursday. “We are working to gradually mitigate most of the impact from these tariffs over the next three to four quarters.”
The company reported fiscal fourth-quarter net income of $4.33 billion, or $3.56 a share, compared with $2.37 billion, or $1.99 a share, in the year-ago period. After adjusting for stock-based compensation and other effects, Micron claimed earnings of $3.53 a share. Micron was expected to post adjusted earnings of $3.33 a share, according to analysts surveyed by FactSet, after Micron forecast $3.23 to $3.37 a share.
Revenue rose to $8.44 billion from $6.14 billion in the year-ago period. Wall Street expected revenue of $8.25 billion, according to analysts polled by FactSet. Micron had forecast revenue of $8 billion to $8.4 billion.
“In the fourth quarter, we set revenue records across all our major markets, from automotive and industrial to mobile and cloud data centers,” Micron chief executive Sanjay Mehrotra said in a statement. On the conference call, Mehrotra said more than one-third of fiscal 2018 revenue came from data-center and graphics sales.
Micron also announced that Mike Bokan will become senior vice president of worldwide sales on Oct. 1, succeeding Steve Thorsen, who is retiring from Micron after 30 years.
On Thursday, Micron shares finished higher after Mizuho analyst Vijay Rakesh said he expects Samsung Electronics Co. 005930, +2.38% will be “very disciplined” in reducing memory-chip production in 2019 to head off a supply glut. Rakesh has a buy rating on Micron. That optimism followed a rash of doubtful analyst notes concerned about the memory market.
Of the 33 analysts who cover Micron, 24 have buy or overweight ratings, nine have hold ratings and no one has a sell or underweight rating. Following a rash of target-price cuts from 10 analysts in September alone, the stock has an average price target of $76.04.
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