The semiconductor segment is typically a forward indicator of the health of the technology sector. Applied Materials (NASDAQ:AMAT) and Micron (NASDAQ:MU) dropping in the last few weeks is a warning signal. The sector may underperform further even though their prospects are unchanged, if not better.
Micron reported second-quarter earnings of 36 cents. Revenue fell 17.8% year-on-year to $4.8 billion. The decline is understandable given the U.S./China trade war the lasted over a year and a global pandemic that is hurting the economy. Micron’s earnings and revenue beat suggest the company will weather the storm. Servers that power the cloud and the work at home spike will drive memory and storage higher.
Micron forecast EPS of 53 cents in Q3 on revenue of $4.87 billion. The firm has an important $8.1 billion in cash. As other segments run out of cash and sell the debt to cover payments, Micron has plenty of liquidity.
Applied Materials has a broader exposure to multiple sectors. But the global slowdown is hitting nearly all of them. The firm withdrew its outlook as it said the coronavirus is disrupting the supply chain and manufacturing operations.
Despite the uncertainties ahead for AMAT stock, the firm may quickly rebound once the lockdown eventually ends. This could take weeks and possibly months. Investors may get AMAT stock at a discount.