Arya downgraded the stock to a $62 per share price target, which was $8 less than his previous target. Analysts from lowdown in the upcoming quarter, citing lower consumer demand and China’s COVID-19 controls.
Bank of America (BAC) senior semiconductor analyst Vivek Arya shared his thoughts on Micron’s earnings and the semiconductor industry.
“The slowdown is catching up in a number of areas,” Arya told Yahoo Finance Live. “The reason we prefer to move to the sidelines here is it could take a few quarters for a growth to reemerge since it’s not just on the sales side.”
Arya downgraded the stock to a $62 per share price target, which was $8 less than his previous target. Other analysts from Barclays, BMO Capital Markets, and Piper Sandler also lowered their expectations for Micron.
Micron is not the only semiconductor company in feeling the pinch. Nearly all the major chip stocks have had a rough 2022 — the PHLX Semiconductor (^SOX) index is down 37% year-to-date (YTD).
Arya expects this slowdown to last for a while. "It could take a few quarters for growth to re-emerge" in semiconductors, the analyst said.
“We have to separate the semiconductor sales and action they’re taking from the stocks themselves,” he explained. “It’s very possible that these stocks bottom [in] six to nine months before we start to see the bottoming of their fundamental trends.”
Arya does believe that investors coulc revisit chip stocks later in the year.
“What we suggested in [our] last report is this correction could play out all the way to the end of Q3. That's the time when supply chains start to normalize and we can see what demand will be,” Arya said.
With the U.S. Bureau of Economic Analysis reporting a 6.3 percent increase in the personal consumption expenditure (PCE) price index for May, Arya wonders what holiday demand looks like for tech products, like iPhones.
Arya thinks September or October would be best to see if consumer demand has changed and if the semiconductor industry has a brighter future.
He also has his eye on what he calls “the three C’s” of semiconductors: cloud, cars, and capital expenditures.
“As we get out of this downturn, you have to look at the places where the fundamental spending and the trends are going to be more resilient over time,” Arya added.
Yaseen Shah is a writer at Yahoo Finance. Follow him on Twitter @yaseennshah22