Micron Technology headquarters in Boise, Idaho, March 28, 2021.
Jeremy Erickson | Bloomberg | Getty Images
Check out the companies making headlines in midday trading Tuesday.
PagSeguro — Shares popped 5.3% after Citi upgraded the Brazilian payment stock to buy from neutral. The firm called the company’s fourth-quarter earnings unsurprising and said it is still in rough waters, but shares were more attractive following recent underperformance. Stone, which was also upgraded by Citi to buy from neutral, edged higher as well on Tuesday.
Affirm — The pay-later service dropped 6.9% after Apple announced a competing service. Apple shares were down about 0.9%.
Occidental Petroleum — The energy stock jumped nearly 4% after a regulatory filing showed Warren Buffett’s Berkshire Hathaway purchased an additional 3.7 million shares for $216 million on Monday and last Thursday. TD Cowen upgraded Occidental to outperform from market perform following the news.
Micron Technology — The semiconductor stock was down 2.8% ahead of its scheduled second-quarter earnings report after the bell on Tuesday. Analysts expect revenue of $3.71 billion and a loss per share of 67 cents, according to FactSet. Micron’s shares have gained more than 14% in the last six months.
PVH — Shares soared 18.9% after the apparel company’s fourth-quarter adjusted earnings per share came in at $2.38, beating estimates of $1.67, per Refinitiv. Its revenue of $2.49 billion beat expectations of $2.37 billion. PVH’s guidance for the first quarter and full year also surpassed estimates.
Paramount — Shares of the media giant gained 3.6% during midday trading on a rating upgrade from Bank of America from neutral to buy. The bank highlighted Paramount’s strong lineup of assets that could help the business in the event it puts itself up for sale.
McCormick & Company — The spice maker’s stock price jumped about 10% during midday trading after reporting better-than-expected earnings for the first quarter. McCormick reported quarterly earnings of 59 cents per share, while analysts surveyed by FactSet expected 50 cents per share.
Ciena — The technology company advanced 4.9% after Raymond James upgraded the stock to strong buy from outperform.
Walgreens Boots Alliance – Shares of the pharmacy giant rose more than 3% midday after the company reported an increase in its quarterly revenue despite seeing a sharp decline in demand for Covid tests and vaccines. Walgreens posted revenue of $34.86 billion for the most recent quarter, compared to analysts’ estimates of $33.53 billion, according to Refinitiv.
Carnival Corp — The cruise operator’s stock price rose 5.9% on Tuesday after Wells Fargo upgraded Carnival to equal weight from underweight. The firm said it sees a more balanced risk/reward for the company
— CNBC’s Alex Harring, Yun Li, Jesse Pound and Michelle Fox Theobald contributed reporting.
Correction: According to FactSet, Micron is expected to post a loss of 67 cents per share. A previous version misstated the estimate.
Market turbulence could reign supreme once again in the week ahead, as investors worry about the potential for more trouble rippling through the banking system. There are a few economic reports worth monitoring, including Friday’s consumer sentiment and personal consumption expenditures. PCE includes an important inflation reading watched closely by Federal Reserve officials. Fed speakers are back on the circuit after last Wednesday’s interest rate hike. Of note should be Fed Vice Chair for supervision Michael Barr, who speaks on bank oversight before the Senate Banking Committee on Tuesday and the House Finance Committee on Wednesday. It was another choppy week on Wall Street, and the S & P 500 was clinging onto a slight weekly gain as of Friday afternoon. Shares of major banks and some regionals were weaker on the day, as investors worried anew about global contagion, as well as more issues, with U.S. regional banks. For the week, the worst sectors were utilities and consumer discretionary stocks. Financials were flat on the week as of Friday afternoon. The broader market was initially under pressure Friday as investors became jittery about Deutsche Bank . The German bank’s credit default swaps have snapped higher — meaning the cost of insuring its debt against default rose. German Chancellor Olaf Scholz defended the bank, saying it was profitable. I ts shares were lower Friday but off the lows after the close of European trading. The U.S. major averages regained their footing later in the day, with the Dow and S & P 500 on track for slight gains. KRE 1Y line banks “We’re in that place, reminiscent of Fridays past, where we have to be concerned about what other shoes could drop,” said Art Hogan, chief market strategist at B. Riley Financial. “But, there’s symmetric risk that we could get as much good news as bad news.” Hogan said there could be a resolution of the sale of the failed Silicon Valley Bank — which would be a positive — but the market is concerned other potential failures are lurking and that investors were cautious ahead of the weekend. Marc Chandler, chief market strategist at Bannockburn Global Forex, said the banking troubles overshadow most everything else in markets. Fed funds futures are pointing to a full percentage point in interest rate cuts this year alone, even though Chairman Jerome Powell stressed the Fed was not considering a rate cut. “The market is saying: ‘You, the Fed, do not appreciate the slowdown that is going to hit us,’” Chandler said. He said even upcoming inflation data is not as important as it had been. “The PCE deflator is going to be sticky, and there’s a chance the core might tick up,” he said. “I think the market sees this as a lagging indicator. I think the tightening of financial conditions is going to lower inflation.” Lower inflation would mean less Fed tightening, which the futures market is predicting. The Fed raised interest rates by a quarter-point Wednesday and signaled in its forecast that it could raise one more time. Powell, during his press briefing, acknowledged that the banking sector’s problems are restricting bank lending and could impact the economy. Some economists expect the tighter credit conditons could restrict capital to businesses and individuals, speeding the arrival of a recession. “Everything before the first week in March seems to be old news,” Chandler said, noting the failure of Silicon Valley and Signature Bank changed perceptions. “A couple of months ago, we were thinking what could break?” he said. “Once again, it’s the … financial sector that is stopping central banks.” Where do stocks go from here? Even with concerns about the financial system, the S & P 500 is still positive for the year, up more than 2%. Stock strategists have been divided on whether the worst is over for stocks — and the economy. “I think October was the bottom, and now we have a black swan credit event happening, and the stock market had some losses. But, I think that was the bulk of the decline,” said Tom Lee, head of research at Fundstrat. “I think the reason we didn’t fall more is people are not really long equity. There’s more cash on the sidelines than there was in May, 2020.” Lee said investors are finding safety in Big Tech, such as Apple and Microsoft . The New York Stock Exchange’s FANG+ index was also up about 32% year to date. .SPX 1Y line y “I think the industrials are going to benefit too. I think the Fed is done hiking, and I think the path of rates has actually turned,” Lee said. “That’s going to allow the PMIs to bottom. When the PMIs bottom, that’s when industrials really start to work.” Lee said those big cap tech names will not work if the economy heads into a recession, but he expects the worst might be over. “The market is going to do a lot better and it held onto its gains despite all the things that rocked the market. I think we’re at 4,700 (on the S & P 500) before the end of the year,” he said. But Evercore ISI’s Julian Emanuel expects the S & P 500 could break the October low and that the economy could sink into a recession. “There’s never been a bear market bottom before a recession started in 60 years,” he said. “We have been expecting a recession to begin in the second half of 2023 for some time. You have to ask yourself over the events of the last two weeks, is this more or less likely?” Emanuel said he expects health care and consumer staples, which have lagged, to start to do better and return to their safe haven status. “‘FANG’ has been holding the whole market up. At some point you o back to the idea that on balance the public owns too much FANG,” he said. FANG is an acronym used for megacap tech names Facebook-parent Meta, Amazon, Netflix and Google-parent Alphabet. Treasury yields continued to slide. The 2-year Treasury yield, above 4% before the Fed rate hike, briefly slid below 3.7%. It traded at 3.77% on Friday afternoon. US2Y 1Y line 2y “It came blasting down. The 2-year has been so volatile. It’s been crazy,” said Michael Schumacher, head of macro strategy at Wells Fargo. The 2-year closely reflects Fed policy. “We think the market is pricing too much Fed easing for the next year,” said Schumacher. He added that market concern about banks has risen. “The probability in the market for a bad event has gone up. … That makes sense, but we think it’s gotten carried away.” Week ahead calendar Monday Earnings: Carnival 5 p.m. Fed Governor Philip Jefferson Tuesday Earnings: Walgreen Boots Alliance, McCormick, Micron 8:30 a.m. Advance economic indicators 9 a.m. S & P/Case-Shiller HPI 9 a.m. FHFA home prices 10 a.m. Fed Vice Chair for Supervision Michael Barr at Senate Banking Committee on bank oversight Wednesday 10 a.m. Pending home sales Thursday Earnings: BlackBerry 8:30 a.m. Initial claims 8:30 a.m. Real GDP Q4 10 a.m. Fed Vice Chair Barr at House Financial Services Committee on bank oversight Friday 8:30 a.m. Personal income/spending 9:45 a.m. Chicago PMI 10 a.m. Consumer sentiment 5:45 p.m. Fed Governor Lisa Cook Fed Governor Christopher Waller
The initial version of this story had incorrect price changes for 2023. It is now updated with information as of the market close on Jan. 31.
Investors staged a January rally, with solid gains for the S&P 500 and an even better showing for technology stocks that led the dismal downward action in 2022.
Attendees wait in line beneath a large LED display of smart connected home products to enter the Samsung Electronics booth, during the Consumer Electronics Show (CES) in Las Vegas, Nevada, on January 6, 2023.
Patrick T. Fallon | AFP | Getty Images
Shares of semiconductors in Asia fell as South Korean chip giant Samsung Electronics saw its worst profit decline since the third quarter of 2014.
Its fourth quarter operating profit fell to 4.31 trillion won ($3.4 billion) — a 69% drop from the same period a year ago, when it raked in 13.87 trillion won.
Operating profit for the final three months of 2022 was the lowest since the quarter that ended in September 2014, when it recorded 4 trillion won.
This comes as global smartphone shipments plunged to a low not seen since 2013, marking the largest ever decline.
Stocks of chipmakers in Asia saw losses as Samsung announced it will continue capital expenditure in the upcoming year, in which it spent a total of 47.9 trillion won for semiconductors in 2022.
The company was widely expected to pull back on further spending as global demand worsened.
Shares of Samsung Electronics fell by 3.6% in Seoul’s trading session on Tuesday. Rivals like SK Hynix also fell more than 2%, while Taiwan Semiconductor Manufacturing Company also fell 3.9% in Asia trade.
“Without some meaningful adjustment in production, I think it’ll be difficult to match the current mismatch in supply and demand,” SK Kim of Daiwa Capital Markets told CNBC’s “Street Signs Asia.”
U.S. semiconductor maker Micron announced last month it will cut its headcount by 10% in 2023 cut its capital expenditures, which Kim described as “not enough.”
Read more about tech and crypto from CNBC Pro
“We expect Samsung and other major memory makers [to] cut their production by at least 20%, that’s something we anticipated from [the] end of this quarter over the second quarter,” Kim said.
Despite worsening economic conditions, Samsung Electronics said it expects demand to recover later this year.
Semiconductors power everything from smartphones to electric vehicles. We think the sector’s battered stocks look primed for recovery.
“For 2023, while the macroeconomic uncertainties are expected to persist, the Company anticipates demand to begin recovering in the second half,” it said in a press release.
“The semiconductor business will continue to reinforce market and technology leadership and expand the proportion of advanced nodes and products.”
JPMorgan Private Bank said the semiconductor industry provides an attractive entry point for investors as chip stocks saw steep declines in 2022.
“Looking at price moves, earnings expectations and [price-to-earnings] multiples, the industry now seems close to a cyclical bottom,” its strategists Jacob Manoukian and Jonathan Linden said in a report released earlier this month, citing data from the World Semiconductor Trade Statistics.
“Semiconductors power everything from smartphones to electric vehicles. We think the sector’s battered stocks look primed for recovery,” they wrote.
Daniel Yoo of Yuanta Securities agreed it may be time to buy chip stocks.
“I think that it is an opportunity to buy, but the question [mark] is that whether or not a really significant turnaround happens in the second quarter or the third quarter,” he said on CNBC’s “Street Signs Asia.”
“We see that continuation of the significant increase in terms of the demand regarding data centers or various areas,” said Yoo. “Also there’s a possibility that the AI-related demand might be picking up going into this year.”
Hardly a day goes by without someone asking me, “Why do you like Jay Powell so much?” He will question whether I am somehow buddies with the Federal Reserve chair, or assume I knew him before he got the job. Nope. Barely knew him. I have spoken to him only once — and as part of a group — since he took the position in 2018. To understand why I like Powell, simply look at the arc of what has happened over the past year and you’ll recognize that his critics should be on their heels, not him. Go back 12 months, and all you heard from billionaire hedge fund managers — who are so delighted to go on TV because they are fawned over endlessly — was that Powell was much too loose with monetary policy and already too late in trying to curb inflation. But then he raised interest rates faster than anyone ever has — to the current targeted range between 4.25% and 4.5%. That’s up from 0.25% to 0.50% in March 2022, when the central bank made its first hike in this tightening cycle of 25 basis points. He has been as tough as nails. He has been relentless and on message. Jump forward to today, and you never hear that Powell is too soft and that he let inflation get away, even as so much of inflation has to do with foreign issues like China’s restrictive Covid policy and Russia’s heinous invasion of Ukraine. At the same time, Congress went along with President Joe Biden in spending a fortune on projects that are heavy on engineering when we have a huge shortage of engineers. Along the way, the disparity between the rich and poor grew quickly, with inflation hitting the latter much harder than the former. The wealthy, after all, allowed every car company and homebuilder to raise prices. Covid stopped the lower and lower-middle classes from bettering themselves. The whole situation, which was inflamed by a fractious press that Powell has chosen to deal with too regularly, was highly unusual. But he has handled it all. Which brings me to Friday’s market. The unemployment report released Friday morning showed wages grew slower than anticipated, increasing 0.3% on the month where economists expected 0.4%. Bonds did rise a tad and it looked like a relief rally. That’s until we got the Institute for Supply Management report showing the services sector contracted in December as new orders and production both declined. Where were the critics then? Why didn’t those who think Powell is a doofus speak up and say maybe he’s gotten it right? Those two highly predictive numbers were the real green lights to the rally. On top of that, rates showed not that we were going into recession — even as I heard that endlessly all day — but that there was suddenly optionality for the Fed; it is sure easier to stop a recession than inflation as any country in Europe will tell you. Now we are faced with the prospect of weaker earnings and number cuts galore. But we are also understanding that stocks have already reflected a lot of that negativity. A tale of two markets We have a truly bifurcated market though. We have a market that has one $3 trillion dollar stock in Apple (AAPL) and stocks worth hundreds of billions of dollars, and a lot more stocks that are $150 billion or less. We also have a division between technology stocks and everything else that is simply astounding in its dichotomy. Let”s contrast two of them: Amazon (AMZN) and Micron (MU). The first hasn’t preannounced weak earnings, just a sense that it must be worried because it hired perhaps as many as 300,000 more people than it needed. One look at the Macy’s (M) preannouncement Friday tells you the consumer isn’t profligate anymore. The other, Micron, has now told you three straight times that things aren’t getting better. In fact, they are getting worse. There is a bigger chip glut than ever and it has spilled over from personal computers, where the decline is as high as 19% year over year, to cellphones, where there is a worldwide slowdown having mostly to do with China and its zero-Covid policy. Since November, Micron’s stock is unchanged. But Amazon’s stock has actually fallen from the high $120s to $86. Why is that? Because an economy that is slowing will reach a point where the multiples of a stock like Micron will shrink until the earnings go lower. Then the multiples go up, but go against easy comparisons. That’s the bottoming process that happens this year. But Amazon? We have no idea what is the right multiple. We just know it is too high. The stock has been cut in half but it means nothing because the capitalization is almost $900 billion. That’s too big until the earnings are better, which it won’t be until there’s more cost rationalization. Period. Any company as big as Amazon that’s caught up in a recession is going to be worth less. It has to get the right multiple, that multiple has to go low, the earnings have to fall and only then will its multiple rise on faltering earnings but easy comparisons. In that sense, Micron is ahead of the mega-caps in the process of hitting bottom. How about Alphabet (GOOGL), Microsoft (MSFT) and Meta Platforms (META)? Same deal. Their market caps are too big, and with Alphabet and Meta the multiples are deceptively small because they are based on advertising and marketing and therefore are about to go down big. That’s the first thing you cut out in a recession. That’s also why the enterprise software companies are too highly valued: the prospective clients have done without them and they will do so again and new customers are hard to come by. Apple is the anomaly. Its market cap looks too big, but it might actually be right because of its service revenue. Meta Platforms’ market cap might be right, too. But TikTok has to be outlawed, more money invested in Reels and not the metaverse, the metaverse has to find a different delivery system, plus WhatsApp has to be spun off at 10 times revenue, meaning it is worth $100 billion. That’s a lot has that to go right. All of this is what will happen in the slowdown — but not recession — that Powell is engineering most deftly. There will be two markets. One is filled with the stocks that are too big and will remain share donors until they are given realistic multiples, see those multiples shrink, and then see them rise again because estimates are higher but comparisons are easier. The rest of the market, including stocks like Micron, will trade as it has in any recession. This is why I so resent those who say the market is “finished.” There is no “market.” There are two sets of companies: one with reasonable price-to-earnings ratios, and one with unrealistic multiples. The largest market caps still have unrealistic P/Es even as they have shrunk dramatically in the last year. The bottoming process for most companies has occurred, which is why I don’t fear the coming earnings season. But the bottoming process for high-growth tech is pretty unfathomable because it was never valued right in the first place. The bottoming process for the special purpose acquisition companies, or SPACs, and crypto is non-existent, along with almost any initial public offering from 2020 on. That could be as many as 1,000 stocks and a huge crypto presence. So, one market is actually quite good. The other market is horrendous. You just have to recognize that the horrendous part is in search of a price-to-earnings multiple, and until it gets one equal to the S & P’s 17 times earnings it might not happen. This is why we have been so concerned about Microsoft and Nvidia (NVDA) as they are in the process of rationalizing their multiples or rerated down. We are concerned about companies like Salesforce (CRM) with multiples that are still too high, we are concerned about Alphabet, Amazon and Meta because their multiples are illusory—too high given they are dependent on advertising. You simply can’t have enough of the rerated stocks, which are about to be winners as pressures from inflation, the dollar and supply chain ease and those headwinds turn into tailwinds. You can’t have too little of the mega-caps until the process of figuring out a real multiple begins. It will happen. It’s happening now for some companies. These are the ones I am most worried about. The good news? They represent a fraction of the companies out there. The bad news? They represent a gigantic amount of market cap that must be lost. I’d say we’re only halfway there. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Jim Cramer at the NYSE, June 30, 2022.
Virginia Sherwood | CNBC
Hardly a day goes by without someone asking me, “Why do you like Jay Powell so much?” He will question whether I am somehow buddies with the Federal Reserve chair, or assume I knew him before he got the job.
CNBC’s Jim Cramer on Friday named four stocks that he believes could mount a comeback this year.
To come up with his picks, he parsed through last year’s worst-performing stocks listed in the Nasdaq 100.
“Out of the Nasdaq’s biggest losers, I think Qualcomm, Lam Research, Micron, and Airbnb will work this year, although not necessarily the first half,” he said, adding, “and don’t forget Illumina.”
Cramer said that while Wall Street expects the semiconductor company to start losing iPhone orders in 2024, it’s possible the company could hold to at least some of those orders due. The company’s push into the auto market should also help the stock, he added.
He acknowledged that the near future could be ugly for chipmakers. However,“you can’t afford to wait around too long after this next bad quarter, because Lam’s stock will bottom months before the business does,” he said.
He advised investors to wait several months to buy shares of Micron, but make sure to do so before the chip glut is over. “Once there’s any sign of a bottom, this thing will bounce back like crazy — always has,” he said.
Cramer said that the company should continue to make money this year thanks to the current travel boom. Investors interested in the stock should buy it gradually on the way down, he added.
A ChargePoint station at the New Carrollton Branch Library in New Carrollton, Md.
Tom Williams | Cq-roll Call, Inc. | Getty Images
Check out the companies making headlines in midday trading.
TG Therapeutics — Shares jumped more than 9% after the biotech company announced this week that the U.S. Food and Drug Administration approved its treatment for relapsing forms of multiple sclerosis in adults.
Micron Technology — Shares of the chipmaker dropped 2% after the stock got downgraded to hold from buy by Argus Research. The firm cited the potential for deep operating losses in upcoming quarters.
GlobalFoundries — Shares of the semiconductor manufacturer lost more than 1% a day after a report that the company will lay off 50 workers from its former California headquarters, according to the Silicon Valley Business Journal.
ChargePoint — The maker of EV charging technology saw shares rise more than 4% after Q-GRG VII (CP) Investment Partners bought more than 1.4 million shares, according to a filing with the Securities and Exchange Commission.
Nikola — Shares of the electric vehicle company fell more than 6% Friday. The move came as the company announced plans to raise cash by selling up to $125 million of senior convertible bonds
— CNBC’s Nick Wells, Alex Harring, Sarah Min and Samantha Subin contributed reporting
Market Movers rounds up the best trade ideas from investors and analysts throughout the day. The pros talked about CarMax , after the company posted third-quarter earnings and revenue that missed analysts’ expectations. Jim Cramer discussed Micron , as the company announced it would reduce its staff by 10% heading into 2023 . Despite this news, Goldman Sachs reiterated the stock as a buy on Thursday . Other stocks mentioned included Nvidia and Rivian . Nvidia is a holding in Cramer’s Charitable Trust portfolio.
Maybe Santa is going to deliver for the stock market, after all. There are still two trading days left till Christmas, and Wednesday showed stocks still have rallies in them, even during this otherwise sluggish month. The major indices surged, with the Dow jumping more than 500 points, and the S&P rising 1.49% and the Nasdaq posting a 1.54% gain. Still, stocks are on course to finish December in the red and potentially end up finishing their worst yearly performance in 14 years. On Thursday, investors will chew over the latest jobless data claims. Read live markets updates here.
Semiconductor maker Micron, squeezed by declining demand for personal computers, said it would reduce its workforce by about 10%, while also suspending bonuses. That amounts to a few thousand staffers, as a recent filing showed the company had about 48,000 employees. Micron announced the decision as it posted its latest quarterly results and forward guidance, both of which fell below Wall Street’s expectations. “In the last several months, we have seen a dramatic drop in demand,” CEO Sanjay Mehrotra said in prepared remarks.
FTX logo displayed on a phone screen is seen through the broken glass in this illustration photo taken in Krakow, Poland on November 14, 2022.
Jakub Porzycki/NurPhoto via Getty Images
If you’ve been following the collapse of crypto exchange FTX and the prosecution of its founder and mastermind, Sam Bankman-Fried, you’ve probably been wondering why we haven’t heard from Gary Wang and Caroline Ellison. And if you suspected they were cooperating with the feds, you were right. On Wednesday night, federal prosecutors revealed that Wang, a co-founder of FTX, and Ellison, who was co-CEO of sister firm Alameda Research, had agreed to plead guilty to federal crimes while working with authorities on the case of the fallen crypto firm. The news broke while Bankman-Fried, aka SBF, was on a flight from the Bahamas to the United States to face his own prosecution.
Ukrainian President Volodymyr Zelenskyy took Washington by storm Wednesday in what’s been hailed as a triumphant visit. It was his first known excursion beyond Ukraine’s borders since Russia launched its unprovoked invasion on the former Soviet country in February. Zelenskyy’s trip to the U.S. capital included a meeting and a press conference with President Joe Biden at the White House and a rousing, 32-minute address to a joint session of Congress. “Thank you for both financial packages you have already provided us with and the ones you may be willing to decide on,” he told lawmakers, who are set to approve more than $44 billion in new aid for Ukraine. “Your money is not charity. It is an investment in global security and democracy, that we handle in the most responsible way.”
Another day, another grim scrap of data from the housing market. Home sales tumbled a deeper-than-expected 7.7% in November from October, marking the tenth consecutive month of sales declines. The sales reflect contracts signed in September and October, when interest rates had peaked before coming down a bit in recent weeks. (Although they’re still about double what they were at the beginning of this year.) “In essence, the residential real estate market was frozen in November, resembling the sales activity seen during the Covid-19 economic lockdowns in 2020,” said Lawrence Yun, the chief economist for the National Association of Realtors.
– CNBC’s Samantha Subin, Kif Leswing, MacKenzie Sigalos, Rohan Goswami, Christina Wilkie, Chelsey Cox and Diana Olick contributed to this report.
— Follow broader market action like a pro on CNBC Pro.
Semiconductor maker Micron announced Wednesday that it would reduce its headcount by about 10% in 2023, in the latest example of a technology industry slowdown affecting employment.
Shares of Micron fell more than 1% in extended trading.
related investing news
Idaho-based Micron has about 48,000 employees, according to a recent SEC filing. The company said it would hit its reduction target through voluntary departures as well as layoffs.
Micron also said it is suspending 2023 bonuses.
“On December 21, 2022, we announced a restructure plan in response to challenging industry conditions,” the company said in an SEC filing. “Under the restructure plan, we expect to reduce our headcount by approximately 10% over calendar year 2023, through a combination of voluntary attrition and personnel reductions.”
Micron said it expected a $30 million charge in the current quarter related to the restructuring, which will also include less investment into manufacturing capacity and cost-cutting programs.
The move comes as Micron reported fiscal first-quarter 2023 results where it missed analyst estimates for earnings and revenue, and forecast a larger loss per share than expected in the current quarter.
Here’s how Micron did versus Refinitiv consensus estimates for the quarter ending in December:
Loss per share: $0.04, adjusted, versus $0.01 estimated
Revenues: $4.09 billion versus $4.11 billion estimated
Micron said it expected a loss of 62 cents per share on revenue of $3.8 billion in the current quarter. Analysts had expected guidance of a loss of 30 cents per share on $3.75 billion in sales.
Micron is best known for supplying memory to computer makers, but it is facing an environment where PC sales have already started to slow or shrink, while server sales are expected to show little growth in 2023.
Micron CEO Sanjay Mehrotra said in prepared remarks that there is too much memory supply and not enough demand, which has resulted in the company keeping more inventory and losing pricing power.
“In the last several months, we have seen a dramatic drop in demand,” Mehrotra said, according to the prepared remarks.
He said he expects the company’s profitability to “remain challenged” through the end of 2023 but that the firm expects revenue and free cash flow to recover later in 2023. Micron said it has suspended share repurchases.
Micron’s restructuring comes after other semiconductor companies have announced hiring freezes or layoffs. In October, Intel announced that it would lay off workers as part of a plan to cut $10 billion in spending. Nvidia announced a hiring slowdown over the summer, and Qualcommannounced its hiring freeze in November.
But it’s not just semiconductor companies adjusting after two pandemic-fueled years of growth and supply issues. Tech companies includingMeta, Twitter, Snap, Stripe and Tesla have also cut staff as companies gird for a potential recession and higher interest rates.
Micron Technology Inc.’s revenue declines could worsen to more than 50% before inventory-saturated customers work though that product and boost sales in the second half of 2023, but before then the memory-chip maker is implementing some austerity measures.
Micron MU, +1.01%
said it expects an adjusted loss of between 72 cents and 52 cents a share on revenue of $3.6 billion to $4 billion for the fiscal second quarter, with the midpoint 51% lower than last year’s second-quarter revenue total of $7.78 billion. Analysts had forecast an adjusted loss of 32 cents a share on revenue of $3.92 billion.
In a filing with the Securities and Exchange Commission, the memory-chip specialist disclosed that management plans to cut about 10% of its staff in 2023, “through a combination of voluntary attrition and personnel reductions.” About $30 million in restructuring costs are expected, all in the fiscal second quarter.
Along with headcount reductions, Micron said in 2023 it will also suspend share buybacks, productivity programs and company bonuses, and that executive salaries would be “cured” for the rest of the fiscal year. Sanjay Mehrotra, Micron’s chief executive, also told analysts after the release of results that he expected profitability to remain challenged through 2023.
Micron specializes in DRAM, or dynamic random access memory, the type of memory commonly used in PCs and servers, and NAND chips, which are the flash memory chips used in smaller devices like smartphones and USB drives.
Micron shares were down less than 1% after hours, following a 1% rise to close the regular session at $51.19. Micron shares are down 45% for the year compared with a 19% fall by the S&P 500 index SPX, +1.49%
and a 32% drop by the Nasdaq Composite Index COMP, +1.54%
and a 33% drop on the PHLX Semiconductor Index SOX, +2.36%.
Mehrotra said he expects DRAM growth to rise by about 10% and NAND to rise by around 20%. “For both years, demand in DRAM and NAND is well below historical trends and future expectations of growth largely due to reductions in the end demand in most markets, high inventories at customers, the impact of the macroeconomic environment and the regional factors in Europe and China,” Mehrotra said.
“But the largest impact to the profitability and financial outlook for us is the supply-demand balance, and the rate and pace of this improvement is going to be a function of aligning supply with demand, and we’re taking decisive actions on CapEx and utilization to address it,” Mark Murphy, Micron’s chief financial officer, told analysts on the call.
Data-center and cloud sales were considered relatively safe, but in another potentially developing crack, Mehrotra said the current environment showed some softness in cloud data-center demand, given tighter consumer spending.
“We do absolutely expect that once we get past the current macroeconomic environment and macroeconomic weakening, longer-term trends for cloud will remain strong,” Mehrotra said. “In terms of the current environment, yes, inventory adjustments and some impact of cloud and demand weakening as well. That’s impacting our overall data-center outlook.”
The CEO also told analysts he expects customers to be in a much better position in the burning off of their inventories by the middle of 2023.
“By mid-calendar ’23, we are projecting, even though we don’t have perfect visibility, but based on all of our discussions with our customers, we are projecting that inventory at customers will be in relatively healthier position by that time.”
“And that’s where we say that our second half of fiscal-year revenue will be greater than first half, and we would expect continued improvements beyond the second half as well,” the CEO said.
Pedestrians walk past the NASDAQ MarketSite in New York’s Times Square.
Eric Thayer | Reuters
It seems like an eternity ago, but it’s just been a year.
At this time in 2021, the Nasdaq Composite had just peaked, doubling since the early days of the pandemic. Rivian’s blockbuster IPO was the latest in a record year for new issues. Hiring was booming and tech employees were frolicking in the high value of their stock options.
Twelve months later, the landscape is markedly different.
Not one of the 15 most valuable U.S. tech companies has generated positive returns in 2021. Microsoft has shed roughly $700 billion in market cap. Meta’s market cap has contracted by over 70% from its highs, wiping out over $600 billion in value this year.
In total, investors have lost roughly $7.4 trillion, based on the 12-month drop in the Nasdaq.
Interest rate hikes have choked off access to easy capital, and soaring inflation has made all those companies promising future profit a lot less valuable today. Cloud stocks have cratered alongside crypto.
There’s plenty of pain to go around. Companies across the industry are cutting costs, freezing new hires, and laying off staff. Employees who joined those hyped pre-IPO companies and took much of their compensation in the form of stock options are now deep underwater and can only hope for a future rebound.
IPOs this year slowed to a trickle after banner years in 2020 and 2021, when companies pushed through the pandemic and took advantage of an emerging world of remote work and play and an economy flush with government-backed funds. Private market darlings that raised billions in public offerings, swelling the coffers of investment banks and venture firms, saw their valuations marked down. And then down some more.
Rivian has fallen more than 80% from its peak after reaching a stratospheric market cap of over $150 billion. The Renaissance IPO ETF, a basket of newly listed U.S. companies, is down 57% over the past year.
Tech executives by the handful have come forward to admit that they were wrong.
The Covid-19 bump didn’t, in fact, change forever how we work, play, shop and learn. Hiring and investing as if we’d forever be convening happy hours on video, working out in our living room and avoiding airplanes, malls and indoor dining was — as it turns out — a bad bet.
Add it up and, for the first time in nearly two decades, the Nasdaq is on the cusp of losing to the S&P 500 in consecutive years. The last time it happened the tech-heavy Nasdaq was at the tail end of an extended stretch of underperformance that began with the bursting of the dot-com bubble. Between 2000 and 2006, the Nasdaq only beat the S&P 500 once.
Is technology headed for the same reality check today? It would be foolish to count out Silicon Valley or the many attempted replicas that have popped up across the globe in recent years. But are there reasons to question the magnitude of the industry’s misfire?
It was supposed to be the year of Meta. Prior to changing its name in late 2021, Facebook had consistently delivered investors sterling returns, beating estimates and growing profitably with historic speed.
The company had already successfully pivoted once, establishing a dominant presence on mobile platforms and refocusing the user experience away from the desktop. Even against the backdrop of a reopening world and damaging whistleblower allegations about user privacy, the stock gained over 20% last year.
But Zuckerberg doesn’t see the future the way his investors do. His commitment to spend billions of dollars a year on the metaverse has perplexed Wall Street, which just wants the company to get its footing back with online ads.
The big and immediate problem is Apple, which updated its privacy policy in iOS in a way that makes it harder for Facebook and others to target users with ads.
With its stock down by two-thirds and the company on the verge of a third straight quarter of declining revenue, Meta said earlier this month it’s laying off 13% of its workforce, or 11,000 employees, its first large-scale reduction ever.
“I got this wrong, and I take responsibility for that,” Zuckerberg said.
Mammoth spending on staff is nothing new for Silicon Valley, and Zuckerberg was in good company on that front.
Software engineers had long been able to count on outsized compensation packages from major players, led by Google. In the war for talent and the free flow of capital, tech pay reached new heights.
Recruiters at Amazon could throw more than $700,000 at a qualified engineer or project manager. At gaming company Roblox, a top-level engineer could make $1.2 million, according to Levels.fyi. Productivity software firm Asana, which held its stock market debut in 2020, has never turned a profit but offered engineers starting salaries of up to $198,000, according to H1-B visa data.
Fast forward to the last quarter of 2022, and those halcyon days are a distant memory.
Layoffs at Cisco, Meta, Amazon and Twitter have totaled nearly 29,000 workers, according to data collected by the website Layoffs.fyi. Across the tech industry, the cuts add up to over 130,000 workers. HPannounced this week it’s eliminating 4,000 to 6,000 jobs over the next three years.
For many investors, it was just a matter of time.
“It is a poorly kept secret in Silicon Valley that companies ranging from Google to Meta to Twitter to Uber could achieve similar levels of revenue with far fewer people,” Brad Gerstner, a tech investor at Altimeter Capital, wrote last month.
Gerstner’s letter was specifically targeted at Zuckerberg, urging him to slash spending, but he was perfectly willing to apply the criticism more broadly.
“I would take it a step further and argue that these incredible companies would run even better and more efficiently without the layers and lethargy that comes with this extreme rate of employee expansion,” Gerstner wrote.
Activist investor TCI Fund Management echoed that sentiment in a letter to Google CEO Sundar Pichai, whose company just recorded its slowest growth rate for any quarter since 2013, other than one period during the pandemic.
“Our conversations with former executives suggest that the business could be operated more effectively with significantly fewer employees,” the letter read. As CNBC reported this week, Google employees are growing worried that layoffs could be coming.
Those special purpose acquisition companies, or blank-check entities, created so they could go find tech startups to buy and turn public were a phenomenon of 2020 and 2021. Investment banks were eager to underwrite them, and investors jumped in with new pools of capital.
SPACs allowed companies that didn’t quite have the profile to satisfy traditional IPO investors to backdoor their way onto the public market. In the U.S. last year, 619 SPACs went public, compared with 496 traditional IPOs.
This year, that market has been a bloodbath.
The CNBC Post SPAC Index, which tracks the performance of SPAC stocks after debut, is down over 70% since inception and by about two-thirds in the past year. Many SPACs never found a target and gave the money back to investors. Chamath Palihapitiya, once dubbed theSPAC king, shut down two deals last month after failing to find suitable merger targets and returned $1.6 billion to investors.
Then there’s the startup world, which for over a half-decade was known for minting unicorns.
Last year, investors plowed $325 billion into venture-backed companies, according to EY’s venture capital team, peaking in the fourth quarter of 2021. The easy money is long gone. Now companies are much more defensive than offensive in their financings, raising capital because they need it and often not on favorable terms.
“You just don’t know what it’s going to be like going forward,” EY venture capital leader Jeff Grabow told CNBC. “VCs are rationalizing their portfolio and supporting those that still clear the hurdle.”
The word profit gets thrown around a lot more these days than in recent years. That’s because companies can’t count on venture investors to subsidize their growth and public markets are no longer paying up for high-growth, high-burn names. The forward revenue multiple for top cloud companies is now just over 10, down from a peak of 40, 50 or even higher for some companies at the height in 2021.
The trickle down has made it impossible for many companies to go public without a massive markdown to their private valuation. A slowing IPO market informs how earlier-stage investors behave, said David Golden, managing partner at Revolution Ventures in San Francisco.
“When the IPO market becomes more constricted, that circumscribes one’s ability to find liquidity through the public market,” said Golden, who previously ran telecom, media and tech banking at JPMorgan. “Most early-stage investors aren’t counting on an IPO exit. The odds against it are so high, particularly compared against an M&A exit.”
There have been just 173 IPOs in the U.S. this year, compared with 961 at the same point in 2021. In the VC world, there haven’t been any deals of note.
“We’re reverting to the mean,” Golden said.
An average year might see 100 to 200 U.S. IPOs, according to FactSet research. Data compiled by Jay Ritter, an IPO expert and finance professor at the University of Florida, shows there were 123 tech IPOs last year, compared with an average of 38 a year between 2010 and 2020.
Buy now, pay never
There’s no better example of the intersection between venture capital and consumer spending than the industry known as buy now, pay later.
Companies such as Affirm, Afterpay (acquired by Block, formerly Square) and Sweden’s Klarna took advantage of low interest rates and pandemic-fueled discretionary incomes to put high-end purchases, such as Peloton exercise bikes, within reach of nearly every consumer.
Affirm went public in January 2021 and peaked at over $168 some 10 months later. Affirm grew rapidly in the early days of the Covid-19 pandemic, as brands and retailers raced to make it easier for consumers to buy online.
By November of last year, buy now, pay later was everywhere, from Amazon to Urban Outfitters‘ Anthropologie. Customers had excess savings in the trillions. Default rates remained low — Affirm was recording a net charge-off rate of around 5%.
Affirm has fallen 92% from its high. Charge-offs peaked over the summer at nearly 12%. Inflation paired with higher interest rates muted formerly buoyant consumers. Klarna, which is privately held, saw its valuation slashed by 85% in a July financing round, from $45.6 billion to $6.7 billion.
The world’s richest person — even after an almost 50% slide in the value of Tesla — is now the owner of Twitter following an on-again, off-again, on-again drama that lasted six months and was about to land in court.
Musk swiftly fired half of Twitter’s workforce and then welcomed former President Donald Trump back onto the platform after running an informal poll. Many advertisers have fled.
And corporate governance is back on the docket after this month’s sudden collapse of cryptocurrency exchange FTX, which managed to grow to a $32 billion valuation with no board of directors or finance chief. Top-shelf firms such as Sequoia, BlackRock and Tiger Global saw their investments wiped out overnight.
“We are in the business of taking risk,” Sequoia wrote in a letter to limited partners, informing them that the firm was marking its FTX investment of over $210 million down to zero. “Some investments will surprise to the upside, and some will surprise to the downside.”
Even with the crypto meltdown, mounting layoffs and the overall market turmoil, it’s not all doom and gloom a year after the market peak.
Golden points to optimism out of Washington, D.C., where President Joe Biden’s Inflation Reduction Act and the Chips and Science Act will lead to investments in key areas in tech in the coming year.
Funds from those bills start flowing in January. Intel, Micron and Taiwan Semiconductor Manufacturing Company have already announced expansions in the U.S. Additionally, Golden anticipates growth in health care, clean water and energy, and broadband in 2023.
“All of us are a little optimistic about that,” Golden said, “despite the macro headwinds.”
