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Micron Stock Is Slumping After a Downgrade. Why the Analyst Fears the Consumer.

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Micron Technology

stock was slumping in premarket trading Friday after the memory chip manufacturer received the first Sell-equivalent rating since February.

Piper Sandler analyst Harsh Kumar downgraded Micron (ticker:


MU

) to Underweight from Neutral on Friday, citing concerns over the company’s oversize exposure to consumer markets that will struggle amid macroeconomic uncertainty. Kumar also lowered his price target to $70 from $90.

“With the global economy expected to face headwinds, we are concerned about Micron’s more than 50% exposure to consumer-like markets such as PCs, mobile, and other,” he wrote in a research note Friday. “In addition, the exposure is much higher than the majority of our semiconductor coverage.”

The company also has exposure to the automotive market, which also will be affected by macroeconomic headwinds, he added.

It doesn’t help that over the last months prices have declined in the dynamic random access memory (DRAM) contract market, which could accelerate as consumer spending stalls, Kumar wrote. If demand continues to weaken, Micron could see pressure on pricing that “could be detrimental to earnings,” he added.

Kumar’s bearish take isn’t currently the norm on Wall Street. It’s the first Sell-equivalent rating for Micron since February, according to FactSet. Currently, 89% of analysts rate the stock a Buy or Overweight, while 8.3% rate it a Hold. In April, Barron’s made the case that Micron was a buy given its low valuations compared with peers and growing demand for memory chips in the long run.

Micron shares were down 4% to $72.37 in premarket trading on Friday. The stock has lost 19% this year.

Write to Sabrina Escobar at sabrina.escobar@barrons.com

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