DRAM chips from Micron are widely utilised in data centres, personal computers, and other electronic devices.
HIGHLIGHTS
Micron's stock was trading at $71.18, down around 6%.
The company's semiconductor business will suffer if interest rates rise.
In the first quarter of 2022, global PC shipments fell by 4.3 percent: Counterpoint
Micron Technology's shares earned an unusual "underweight" recommendation from a brokerage owing to the memory chip maker's high exposure to mobile phones and computers at a time when increasing inflation compels customers to cut down on their spending.
In early Friday trade, Micron shares were down around 6% at $71.18 (approximately Rs. 5,530).
In a letter to clients, Piper Sandler said, "With the global economy projected to encounter headwinds, we are worried about Micron's more than 50% exposure to consumer-like industries such as PCs, mobile, and other."
The company's semiconductor division, which serves to the car sector, is also expected to suffer as a result of higher rates, a weakening economy, and the likelihood of an excess inventory build, according to the brokerage.
Piper Sandler went on to say that the Dynamic Random Access Memory (DRAM) market, which accounts for more than 70% of the company's overall sales, had already begun to witness price reductions in most configurations.
DRAM chips from Micron are widely utilised in data centres, personal computers, and other electronic devices.
Global PC shipments fell 4.3 percent in the first quarter of 2022, according to market research firm Counterpoint, as the crisis in Ukraine and China's lockdowns strained already strained supply chains and added to component shortages.
According to IDC, global smartphone shipments are likely to drop 3.5 percent this year.
"While we believe the business has done an excellent job of reducing costs and remaining fiscally conservative, we still see memory as a commodity industry in comparison to the rest of our universe. As a result, we believe Micron will fall short of expectations "Piper Sandler expressed her thoughts.
However, the brokerage expressed confidence in the company's data centre division, which accounts for less than 30% of sales.
It lowered Micron's price estimate to $70 from $20 (approximately Rs. 1,550). (roughly Rs. 5,440).
