Micron Technology Inc. faces many questions when it reports earnings, with the most important focusing on concern that memory-chip prices have wandered too high even amid continued strong demand from data centers.
Micron MU, -1.61%[1] is expected to report earnings after the bell on Wednesday. The stock has been volatile in the quarter after a massive run-up as optimism about high memory-chip demand, and the high prices that result, competes with skepticism that the good times can keep going even with regulatory rumblings from the industry’s biggest customer.
Chinese regulators launched a probe[2] into memory chip makers like Micron, Samsung Electronics Co Ltd. 005930, -1.14%[3] and SK Hynix Inc. 000660, +0.81%[4] earlier this month. That followed reports that China —which accounts for about a quarter of the world’s demand — had met with executives at Micron to talk about reining in the growing price of memory chips.
Micron shares fell recently following a downgrade from Morgan Stanley[5] that said that any erosion in fundamentals would be a negative for the stock, which had been trading at its highest levels since the dot-com bust[6]. That rally had been fueled in part by Micron’s investor day, which included the announcement of a $10 billion share buyback plan[7] and a raised outlook.
Here is what to expect.
Earnings: Of the 26 analysts surveyed by FactSet, Micron on average is expected to post adjusted earnings of $3.12 a share. Micron forecast third-quarter earnings of $3.12 to $3.16 a share, up from its previous forecast of $2.76 to $2.90 a share. Estimize, a software platform that uses crowdsourcing from hedge-fund executives, brokerages, buy-side analysts and others, calls for earnings of $3.16 a share on average.
Revenue: Wall Street expects revenue of $7.75 billion from Micron, according to 25 analysts polled by FactSet. Micron expects revenue of $7.7 billion to $7.8 billion, up from its previous forecast of $7.2 billion to $7.6 billion. Estimize expects revenue of $7.76 billion.
Analysts expect sales of DRAM, or dynamic random access memory, the type of memory commonly used in PCs and servers, to jump 54% to $5.48 billion. Wall Street forecasts a 7% rise in sales of NAND chips, the flash memory chips that are used in USB drives and smaller devices such as digital cameras, to $1.96 billion.
Stock movement: Even with the...