Micron shares plunged 13% in extended trading on Wednesday after the chipmaker issued weak second-quarter guidance despite an earnings beat for the latest period.
TakeAway Points:
- Micron shares plunged 12% in extended trading after the chipmaker issued weaker-than-expected second-quarter guidance.
- First-quarter revenue was in line with analysts’ expectations, while earnings topped estimates.
- Shares of Broadcom closed up more than 24% Friday, pushing the company’s market cap beyond $1 trillion for the first time.
- For the year, the company said artificial intelligence revenue jumped 220% to $12.2 billion.
- Broadcom reported $14.05 billion in revenue for the fourth quarter, up 51% year over year.
Shares of Micron plummet
According to LSEG, earnings per share: $1.79, adjusted vs. $1.75 expected, while revenue: $8.71 billion vs. $8.71 billion expected.
For the second quarter, Micron said it expects revenue of $7.9 billion, plus or minus $200 million, and adjusted earnings per share of $1.43, plus or minus 10 cents. Analysts were expecting revenue of $8.98 billion and EPS of $1.91, according to LSEG.
The computer memory and storage company has seen its shares climb 22% year to date as of market close, trailing the Nasdaq’s 29% gain. In the earnings report, Micron highlighted data centers and artificial intelligence ventures with Nvidia’s processors as growth areas.
“While consumer-oriented markets are weaker in the near term, we anticipate a return to growth in the second half of our fiscal year”, said CEO Sanjay Mehrotra in a press release. “We continue to gain share in the highest margin and strategically important parts of the market and are exceptionally well positioned to leverage AI-driven growth to create substantial value for all stakeholders.”
Broadcom stock closes up 24%
Shares of Broadcom closed up more than 24% Friday, pushing the company’s market cap beyond $1 trillion for the first time. It’s Broadcom’s best trading day on record.
The move comes after the company reported fourth-quarter results that beat Wall Street’s expectations for earnings and showed strong artificial intelligence revenue growth.
Broadcom reported $14.05 billion in revenue for the fourth quarter, up 51% year over year but shy of the $14.09 billion expected by analysts according to LSEG. In Broadcom’s semiconductor solutions group, which includes its AI chips, revenue increased 12% to $8.23 billion from $8.03 billion a year ago.
The company said AI revenue jumped 220% for the year to $12.2 billion. The stock popped in after-hours trading Thursday when Broadcom CEO Hock Tan said the company is developing custom AI chips with large cloud customers.
Broadcom’s net income came in at $4.32 billion, or 90 cents per share, up 23% from $3.52 billion, or 83 cents per share, in the same quarter a year earlier.
Bernstein analysts wrote in a Friday note that Tan might look good in a leather jacket, a nod to Nvidia CEO Jensen Huang’s signature style. They said there were a lot of nerves ahead of Thursday’s results, but Broadcom’s fourth-quarter earnings were “decent” and they were encouraged by management’s near-term and longer-term vision for AI.
Market reactrions
The analysts raised their price target on the stock to $250 from $195.
“Overall, the AI story seems to really be coming into its own,” the analysts wrote.
Analysts at Bank of America reiterated their buy rating on the stock, in part because of its “surging AI opportunity.” They said Broadcom currently dominates the market for custom chips for internal workloads, but they cautioned that there is some risk from the “stiff competition against NVDA’s stronghold in merchant silicon and enterprise customers.”
Morgan Stanley analysts said Broadcom’s commentary around AI will likely add to long-term enthusiasm around the company, which they expect will continue to build. They said Broadcom remains “one of the most compelling ways to play AI semis” over the next two to three years.
“Overall, the quarter itself will provide a relief vs. low nearer term expectations, and the longer term commentary around AI will stoke enthusiasm for custom AI chip longer term prospects — enthusiasm that was already at a fever pitch,” the analysts wrote in a Friday note.
