What took place
Samsung, a Korean tech behemoth and maker of computer memory chips, reported shockingly subpar earnings on Friday, with profits down 96 % and plans to" cut memory production"" by meaningful level."
Although this was bad news for Samsung, it is helping to lift shares of the troubled rival Micron Technology ( MU 8.12 %), which are currently up 7.5 % on the news as of 1015 a.m. ET.
Now what?
You may remember that Micron reported a 53 % decline in revenue late last month as memory prices fell in financial Q2 2023 due to surplus. Additionally, management forewarned that fiscal Q3 revenue would be down 57 % year over year and that the quarter's's adjusted loss would likely be$ 1.58 per share due to negative gross profit margins.
One of Micron's's biggest issues at the moment is that there are currently too few people purchasing also many chips in a saturated markets. Because of this, Micron owners perceive Samsung's's bad news as good news. Higher levels of stock are being complicated by" rapidly deteriorating end market demand" to trigger price erosion, according to a report from Deutsche Bank this morning, making it difficult for anyone in the memory market to make money at the moment. According to TheFly.com, Samsung's's decision to reduce formation will address at least one of these two issues, easing pressure on charges that ought to be advantageous to everyone in the sector.
Today what?
Traders who are considering a significant expense in Micron today should pay close attention to the small print. Deutsche Bank reports that Samsung plans to lower DRAM brain production while largely maintaining NAND flash production levels. This is particularly good news for Micron, which receives 63 % of its revenue from DRAM sales and only 31 % from NAND, so Samsung's's cuts should benefit it overwhelmingly, according to businessquant.com data.
Despite this, it is still unclear whether this progress is good enough information to warrant purchasing Micron stock at this time. According to data from S & ampP Global Market Intelligence, Micron is currently valued at 40 times trailing earnings, has suffered a significant loss this year( more than$ 5 per share ), and is predicted to return to profits in 2024 with an enormous forward PE ratio of 87. Therefore, it might be 2025 before Micron is making enough money to restore the value of its property.
Whether you have the patience to wait that long will determine whether you should purchase Micron on today's's information.
