Micron heading for an earnings miss?
My hunch is the current quarter results don't mean a thing to MU's share price. What matters is the clear signal that the improvement in DRAM and NAND is on the horizon.
From what little I can tell NAND prices continue to collapse badly.
The Chine Flash Market page says 256GB TLC NAND (that seems like a "mainstream chip" was $2.70 on Jan 1st, 2019, and is $2.26 today. That's about a 17% price decline in 2.5 months. NAND can't do well with prices plunging like that. The same chip was $3.00 on Dec 1st 2018.
It had stabilized at about $2.38 for about three weeks in mid to late Feb, then began heading back down in the past week.
I think when prices are plunging like this, everyone stops buying to see where the price will stabilize. Anyone who bought any NAND in Jan, and hasn't sold the end product which uses the chip yet is likely going to lose money when the end product sells.
And I think the NAND makers cannot stop production to let the price stabilize and have the buyers consume all the inventory which has been produces since Dec and not yet purchased.
My hunch is there is going to be a MAJOR DISASTER in the NAND industry in Q1, with the outlook for Q2 not being "the bottom", but instead the outlook is inventory is super high, demand is non-existant, and we're all cutting all CapEx for the foreseeable, cutting dividends, conserving cash, selling off non-core assets, and seeing which competitor is going to be the next to die.
Maybe not, we'll see.
The only "positive" development that I see is that the prices of the SSDs that I have been tracking HAVE NOT decreased much in the past 1-2 months. Compared to Sep/Oct when I started tracking the SSD prices (and it seemed the price of one or two collapsed every two weeks or so), the SSD prices are stable. That indicates the makers don't think they need to cut the prices of existing products to move inventory. Maybe. Who knows?
For MU and their upcoming NAND sales, I wonder what percentage is on pre-agreed contract prices which were agreed many quarters ago, and what percentage of sales is into the spot market. If a good chunk is into the spot market, I'll bet it's awful news. |
