Semiconductor stocks saw broad gains on Wednesday, led by companies tied to smartphones, while investment firm Citi said Micron Technology (NASDAQ:MU) was showing the "classic signs" of a bottom.
On Wednesday, Foxconn (OTCPK:FXCOF), which manufactures Apple's (AAPL) iPhone, said overall revenue would grow this year, though it cautioned that smartphone demand would slow. However, rising inflation would only have a limited impact on mid and high-end smartphones.
Micron (MU) gained more than 3% in mid-day trading as Citi noted the company has shown the three signs of a bottom: it lowered its capex spending; it is trading near trough valuation; and it has most of its downside already in consensus estimates.
"[Fiscal 2023] EPS estimate is down roughly 50% since last quarter," analyst Christopher Danely wrote in a note to clients, adding that after yesterday's news of a weaker-than-expected forecast, "most of the downside to consensus estimates will be out."
Baird analyst Tristan Gerra, who has a neutral rating on Micron (MU), said the company is "at the center of the ongoing PC demand and inventory storm," citing its oversized exposure to the PC market and sensitive nature to memory pricing.
"In our view, the combination of 20+ year-high inventory days in the PC supply chain, along with a structural demand shift away from home electronics to outdoor leisure, suggests an 'L-shaped' recovery in PCs with demand likely remaining very muted in 2023," Gerra wrote in a note to clients.
On Tuesday, investment firm Raymond James downgraded Micron (MU) after the weak forecast, citing the fact that "near-term news is likely to work against shares" going into the next fiscal year.