Memory in 2023: What follows the unprecedented downcycle?
In 2022, sell-in memory demand collapsed with a violence second only to what happened during the great financial crisis in 2008. This resulted from a slowdown in most end markets and steep inventory corrections.As a result, manufacturer inventory spiked up, capacity utilization dropped, and gross margins collapsed. We expect a fast recovery in end demand in the second half of 2023, but with manufacturers having to draw down their inventories, we expect capacity utilization to remain low until the end of 2023, but to recover fast beyond, as supply from excess inventory will disappear instantly.
Consensus is missing this steep recovery in utilization and gross margin in 2024. We expect a 25% beat on EPS for FY 2024. This is worth the wait and we recommend Micron as a Buy, with a $75 Target Price.
Micron Technology provides memory and storage solutions. The company's portfolio of memory and storage technologies include Dynamic Random Access Memory, Not And, 3D XPoint? memory, and Not Or. The company's segments are: Compute and Networking Business, which includes memory products sold into client, cloud server, enterprise, graphics, and networking markets; Mobile Business, which includes memory products sold into smartphone and other mobile-device markets; Storage Business, which includes Solid-State Drives and component-level solutions sold into enterprise and cloud, client, and consumer storage markets; and Embedded Business, which includes memory and storage products.
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