Micron Stock Price Bullish Trend is Unsustainable

Micron (NASDAQ: MU) stock price tumbled after hitting 52-weeks high of $50. Lower than expected financial performance in the fourth quarter negatively impacted investors sentiments.

Concerns over the huge decline in sales from Huawei added to the stock price selloff.

MU Micron Technology, Inc. daily Stock Chart

Its revenue of $4.87 billion dropped 42% from the previous year quarter. The full-year revenue of $23.41 billion declined significantly compared to revenue of $30.39 billion in fiscal 2018.

The company blamed lower than expected revenue from Huawei for the huge revenue slump.

Indeed, sales to Huawei plunged compared to the previous quarter. Sales were also down significantly from what the company had anticipated before the U.S. ban.

Micron has applied for waivers with the U.S. government. The market reports suggest if the government doesn’t grant the waivers, Micron sales could worsen in the following quarters.

Negative revenue growth has impacted its earnings per share and cash flows in Q4. Its earnings per share declined almost by half compared to the previous year quarter.

Full-year earnings per share stood at $6.35, down from earnings of $11.95 per share in 2018.

Its operating cash flow for the full year dropped to $13.19 billion. Micron had generated operating cash flow of $17.40 billion in the prior fiscal year.

Despite weak financial numbers, the CEO is optimistic about future fundamentals.

The CEO said, “We are encouraged by signs of improving industry demand. We are mindful of continued near-term macroeconomic and trade uncertainties.

The CEO claims that future fundamentals are strengthening. He believes Micron is well-set to address the robust secular demand for memory and storage solutions.

The company expects first-quarter revenue to stand in the range of $5 billion. The revenue guidance is slightly higher from revenue of $4.87 billion in the previous quarter. The earnings per share guidance for Q1 stands around $0.39 to $0.53. Micron stock price is likely to face headwinds in the short-term. This is due to a trade war with China and a ban on Huawei.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.

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