Concern that slowing demand for smartphones and personal computers is hurting the outlook for memory chips and other components has sparked a flurry of cautious comments from Wall Street.
The issues affect memory chip manufacturers Micron Technologies (stock ticker: MU) and
(WDC); Western Drive Producers and
(STX); and mobile phone chip providers
Chip analyst Joseph Moore made cautious comments about the outlook for both Western Digital, which sells NAND memory products as well as disk drives, and Micron, which offers NAND and DRAM memory chips. Memory markets are weak in volume, he said in a research note, with DRAM pricing “moderately” down in the current quarter, and NAND pricing “weaker.”
Moore retained an overweight rating on Western Digital, a call based on a sum of the parts analysis, but lowered his earnings forecast, noting that NAND pricing is falling faster than expected, due to weakness in both the PC and Chinese smartphone market. . The vulnerability in computers and smartphones is spreading geographically, he said, and is beginning to affect demand for servers and other products.
It lowered its 2022 calendar order for Western Digitial’s adjusted earnings per share to $6.99 from $8.41 and now expects 2023 earnings of $6.35 per share, down from $9.66.
It should be noted that Western Digital is present mid-strategic review It can disconnect your corporate drive from the flash memory business.
For Micron, Moore maintained an equal weight rating, cutting the target price to $56, from $83. Moore thinks Street’s estimate is too high for Micron, noting that his forecast is 25% lower than the general consensus for the 2022 calendar, and 46% lower for 2023. “While we appreciate Micron’s cost structure and product roadmap improvements, we are increasingly cautious about expectations The final market, more specifically elevated inventory levels and pressure associated with downward pricing,” he wrote.
Mizuho analyst Vijay Rakesh touched on the same issues. In a research note focused on the outlook for the memory chip sector, he said “sentiment and pricing trends have regressed significantly in the past month” with weakness in computers and smartphones. He described the server sector as “the only bright spot,” but said pricing trends for both NAND and DRAM chips remain negative for the second half of the year.
Rakesh remains a long-term revolution in both memory chip companies, citing the long-term power of both 5G phones and servers. He held buy ratings on both Western Digital and Micron, but trimmed his stock price targets, lowering his call on Western to $68 from $72. He lowered his Micron target to $95, from $113.
On a separate note, Rakesh said smartphone supply-chain checks indicate risks to results for both the June quarter and the rest of the year, citing a slow reopening of business in China, weak consumer demand globally, and growing inventories. The analyst lowered his forecast for 5G phone sales 2022 to 630 million units, from 700 million, saying that overall phone sales will be flat, and Chinese sales of 5G phones flat down.
Rakesh maintained his buy rating on Qualcomm, but lowered his share price target to $168, from $185. He also held a sale on Skyworks, but lowered his target to $150, from $170. For Qorvo, it remained in Neutral, with a new target of $110, down from $128.
On Tuesday, Barclays analyst Tom O’Malley wrote a cautious note about demand for the drive. For the June quarter, it now sees unit sales fall 6%, versus earlier forecasts of flat demand. For the full year, he trimmed his unit’s forecast to a 15% decline from -12%, saying revenue would fall 5%, down from 3% previously. Higher average selling prices will partially offset lower volumes.
O’Malley noted that both Seagate and Western Digital have noticed weakness in the PC and smartphone markets in recent conferences, but said there has also been some unexpected moderation in demand for nearby drives used by data center customers.
O’Malley trimmed its estimates for the 2022 and 2023 calendars for both companies. He kept his price target of $65 on Western Digital, while cutting his call on Seagate to $70, from $85.
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