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Micron share price: 4 things to watch for in Q2 results

The technology company will have to answer four questions from investors before its Q2 earnings report.

Micron share price will be monitored by investor when the technology company releases its Q2 earnings report. Here are four questions investors will be asking.

Will Micron's earnings per share and revenue rise?

Micron’s Q4 revenue was high, but had lower guidance for Q1 profits. Micron’s revenue is projected to between $5.7 billion-$6.3 billion. Micron’s earnings per share is expected to be $1.75.

Will the US-China trade war affect Micron’s earnings?

The US-China trade war could impact Micron’s Q2 profits. In autumn 2018, chief financial officer, (CFO), Dave Zinsner, noted that the trade battle would affect Micron’s profits.

‘Our gross margins will also be impacted in the near term by the announced 10% tariff on $200 billion of imports from China, which will go into effect on Sept. 24. We are working to gradually mitigate most of the impact from these tariffs over the next three to four quarters’, said Zinsner.

Micron was caught in the US-China trade impasse after accusing a Chinese company, Fujian Jinhua, of stealing trade secrets from the company. As a result, the company accused Micron of antitrust violations. The resulting battle between the two companies have been part of the larger US-China trade dispute. Investors will want to know if the US-China trade impasse will impact Micron’s Q2 earnings.

Will an excess of DRAM chips impact Micron's profits?

Micron has struggled because of weakening dynamic random-access memory[DRAM] chip sales. The sales decreased because of an oversupply of the chips, according to chief executive officer (CEO), Sanjay Mehrotra.

Mehrotra also noted that ‘[due] to a lengthy period of rising DRAM prices, we believe some of our customers had decided to carry higher-than-normal inventory levels, and as DRAM supply caught up with demand, these customers are bringing down their inventory levels.’

‘DRAM demand weakened through the course of our fiscal first quarter. Since the start of this fiscal second quarter, the weakening demand trend has continued and our near-term visibility is limited,’ added Mehrotra.

Despite the weak guidance the company gave for Q2, Micron’s Q2 profits could be boosted by cost-cutting measures.

‘Our cost reductions in DRAM and NAND have meaningfully outpaced the industry over the last three years,’ said Micron.

What do analysts predict for Micron’s profits?

Matthew Ramsay, investment banking analyst from Cowen, is bullish on Micron stock.

He noted that the company’s problems could be ‘alleviated by the second half of 2019 as certain players scale back capacity/investment and compute chip supply catches up with demand as customer inventories are digested’.

Though Ramsey is optimistic about Micron’s Q2 earnings, he feels that microchip companies like Micron could still face an uphill battle before sales increase again.

‘That said, it may be a bumpy couple of quarters in the meantime for DRAM/NAND [flash technology],’ added Ramsay.

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