Micron GDDR6X graphics memory solution |
Micron shares were down about 6% at $71.18 in early trading
on Friday.
"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," Piper Sandler wrote in a note to clients.
The brokerage also expects the company's chip business that
caters to the auto industry to suffer due to rising rates, a slowing economy,
and the possibility of an excess inventory build.
Piper Sandler added that the Dynamic Random Access Memory
(DRAM) market, which represents over 70% of the company's total revenue, had
already started to see price declines for most configurations.
Micron's DRAM chips are widely used in data centres,
personal computers and other devices.
Market research firm Counterpoint reported in April that
global PC shipments were down 4.3% in the first quarter of 2022, as the war in
Ukraine and China's lockdowns pressured already fragile supply chains and added
to shortages of components.
Global smartphone shipments are expected to decline 3.5%
this year, according to IDC.
"While we do feel the company has done an outstanding
job to reduce its cost structure and remain financially disciplined, we
continue to view memory as largely a commodity market compared to the rest of
our universe. As a result, we do feel Micron is likely to underperform,"
Piper Sandler said.
The brokerage, however, expressed confidence in the
company's data centre business, which represents less than 30% of revenue.
It cut Micron's price target by $20 to $70.