Semiconductor stocks, including Micron Technology (NASDAQ:MU), Advanced Micro Devices (NASDAQ:AMD) and Taiwan Semiconductor (NYSE:TSM), declined in early-morning trading today. Apparently, AMD and TSM stocks are collateral damage, as MU stock’s decline can be attributed to downbeat fiscal guidance and a downgrade from Bank of America’s analysts.
It’s not fun when stocks in your portfolio get dragged down by another company’s problems. Yet, this can happen sometimes on Wall Street. Today provides a perfect example, as shares of Advanced Micro Devices and Taiwan Semiconductor are under pressure due to Micron’s troubles.
This isn’t to suggest Micron isn’t doing well on the financial front. For the third quarter of fiscal 2022, Micron reported $2.59 in adjusted earnings per share. That’s higher than $1.88 from the year-earlier quarter and the analyst consensus estimate of $2.45 per share.
Furthermore, Micron’s quarterly revenue of $8.64 billion represented a 16% year-over-year increase and was in line with analysts’ consensus forecast. So, why would investors choose to dump their MU shares today?
Why Semiconductor Stocks Are Falling
In this case, it’s all about the forward guidance. For the fourth fiscal quarter, Micron is guiding for an earnings-per-share range of $1.43 to $1.83. This range falls short of the analysts’ consensus estimate of $2.57 per share. Also, Micron anticipates fourth-quarter revenue of $6.8 billion and $7.6 billion. This is below the $9.14 billion that analysts had modeled.
Understandably, Micron cited weak consumer demand due to inflation and the easing of the chip shortage. Still, Micron CEO Sanjay Mehrotra remains “confident about the long-term secular demand for memory and storage.”
Analysts at Bank of America, however, might not be as confident. They warned that a recovery is “unlikely” this year, and Bank of America analyst Vivek Arya downgraded MU stock from “buy” to “neutral.” Additionally, Arya slashed his price target on Micron shares from $70 to $62.
Arya cited weak consumer PC/smartphone demand, Covid-19 lockdowns in China and slower enterprise sales in defense of the downgrade.
Clearly, it’s a tough time to be in the chipmaking business. And, given today’s price moves, it’s a tough time to hold shares of Micron, Advanced Micro Devices and Taiwan Semiconductor.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.