Micron Dips as Samsung Earnings Show the High Bar for Memory Stocks

Dow Jones
10/29

Micron Technology was dropping early Thursday. Earnings from peer Samsung Electronics showed memory-chip companies can be the victim of high expectations.

Micron was falling 3.1% in the premarket. That comes after Samsung dropped 4.1% in South Korean trading, despite reporting a fourth consecutive quarter of record earnings.

Huge profits have become almost routine for memory-chip companies. Samsung's net profit jumped more than six times from a year earlier to 75.136 trillion won ($56.15 billion), with revenue more than doubling, all driven by the company's chip division.

But shareholders still appeared to be disappointed as Samsung largely reiterated its already issued guidance and shareholder-return plan. That was in contrast to its domestic peer SK Hynix which unveiled a plan to return $75 billion to shareholders in its own report on Wednesday.

"[Samsung] shares declined during the earnings announcement as shareholder returns offered no upside surprise," said MS Hwang, research director at Counterpoint Research. "This highlights the real challenge of navigating an equity market with elevated expectations."

The test for Micron will come when it is able to start major stock buybacks, which will be from Dec. 9, under the conditions of its 2024 U.S. Chips Act funding. UBS analyst Timothy Arcuri has estimated Micron can repurchase shares at a rate of up to $200 billion annually.

 

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