Top memory stocks like SanDisk (SNDK), Western Digital (WDC), and Seagate Technology (STX) retreated for the second consecutive day as investors prepared for Micron’s upcoming earnings, which will provide more information about the artificial intelligence sector.
Sandisk, Western Digital, Seagate Drop Before the Micron Earnings
SanDisk stock dropped to $1,922, down 18.42% from its high this week. This retreat happened after it formed an abandoned baby candlestick pattern, a common bearish sign in technical analysis.
Western Digital, on the other hand, dropped to $645, 20% below its highest point this month. Seagate and Micron Technologies dropped to $1,000 and $1,043, respectively. These stocks retreated even as the broader stock market jumped, with the S&P 500, Dow Jones, and Nasdaq 100 rising by 52, 505, and 205 points, respectively.
Memory stocks have tumbled as investors await Micron, the largest memory company in the United States, with a market capitalization of over $1 trillion.
These earnings will have a major impact on Micron shares and those of other companies in the industry, such as Western Digital, SanDisk, and Seagate. Also, they will affect their direct competitors in the high-bandwidth memory (HBM) industry, such as SK Hynix and Samsung.
READ MORE: NVIDIA and Top Analysts Are Bullish on IREN Stock: Is It Still a Buy?
Pros are Optimistic About Micron Earnings
Analysts are highly optimistic about Micron as the artificial intelligence (AI) supercycle continues. The average estimate is that its revenue surged by 280% in the last quarter to $32 billion, while this quarter’s revenue will hit $42.5 billion. The annual revenue is expected to come in at over $114 billion, followed by $196 billion next year.
If Micron’s earnings and guidance are strong, it means that its top peers will jump. On the other hand, if these numbers signal that the industry is slowing, they will trigger a strong sell-off, as we saw when Broadcom and Oracle reported their financial results. In a note to clients, Tom Lee, the founder of Fundstrat, recommended that investors buy the dip. He said:
“Semis [are] down -7%. This is the 18th time since 2011. 88% of the time, semis more than recover one month later. Buy that dip.”
Memory stocks are generally undervalued relative to the broader market despite their strong growth and gains. Micron stock trades at a forward price-to-earnings ratio of 16, while SanDisk trades at a multiple of 30. Western Digital has a multiple of 38. Only Seagate, which has a multiple of 80.
READ MORE: Here’s the Real Reason Nasdaq 100 and S&P 500 Slumped Today
