Micron Technology Inc has warned of a weaker than previously projected fourth quarter. The new update was issued by the company’s Chief Financial Officer, Dave Zinsner, at this week’s KeyBanc investment conference. The U.S’s biggest computer memory chip maker projected worsening demand and said it may not meet its earlier revenue projections for the fiscal first quarter. Following these comments, the company’s share dropped 5%.

Drop in demand for computer chips

According to Zinsner, the company will not achieve the sales outlook of $5.4 billion to $5.6 billion for the period three-month period ending in November. The new guidance negates the company’s June 2019 guidance of $0.95 to $1.15 in earnings per share (EPS) and $5.75 billion to $6.25 billion in revenue.

Following the comments, Deutsche Bank was the first to respond by downgrading its stock from “Buy” to “Hold.” In addition, analysts have projected that demand for memory chips may not improve until the 2Q 2021.

Micron is also performing poorly

Micron stock has also not been performing well in recent weeks. The stock underperformed the PHLX Semiconductor Index (SOX) in addition to failing to reach the February high. The company’s stock has broken major support at the 200-day exponential moving average (EMA) for the second time in 2020. The company may be in its first downtrend since 2016.

Then stock has not posted any new high since May 2018, and recovery attempts in February 2020 stalled within three points of the prior peak.

Micron’s memory chips are used in all types of computers, including laptops and servers. They are also used for storage in smartphones.

Micron 2020 Second Quarter Results

Micron has released its financial results for the second quarter ended June 30, 2020, with $4,356,000 in revenue in revenue. This is an 11% drop from the $4,892,000 that the company reported in 2019. Micron reported $1,031,000 in net income compared to $471,000 in net loss reported in the second quarter of 2019.

The company reported 15.6% in gross margin in the 2Q 2020 compared to 10.4% reported in 2Q 2019. Other income amounted to $1,213,000 after accounting for loan forgiveness.