Why Micron Stock Is Falling Today

Micron (NASDAQ: MU) stock is losing ground in Wednesday trading. The company's share price was down 2.5% as of 1 p.m. ET. The stock had been down as much as 7.2% earlier in the session.

Micron's valuation is moving lower following announcements at an investor conference the company held later. The memory and storage solutions specialist's share price is also being dragged lower by macroeconomic pressures.

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Micron stock moves lower after business updates

At its investor event yesterday, Micron reiterated its guidance for the second quarter of its current fiscal year -- which wraps at the end of this month. The company's last guidance update called for earnings per share between $1.33 and $1.53 and revenue between $7.7 billion and $7.9 billion.

The company said it did anticipate revenue growth in the third quarter. But gross margins are expected to slip due to consumer-oriented products making up a greater share of the sales mix and unfavorable pricing dynamics for its NAND memory solutions.

Sales to artificial intelligence (AI) data center operators and other enterprise customers have become more important for Micron's business and stock performance. The company typically sees much lower profitability on product sales in the consumer market.

Adding another bearish catalyst for the stock today, the Bureau of Labor Statistics Consumer Price Index (CPI) report showed higher-than-expected inflation in January. CPI inflation for the month came in at 3.3% -- ahead of the 3.2% level forecasted by the average economist estimate.

What's next for Micron?

With today's valuation pullback, Micron is now valued at roughly $102 billion and trades at approximately 13 times this year's expected earnings. The company looks cheap on a price-to-earnings basis, but investors should understand that evaluations of the company on this basis can be flawed.

As a player in the memory chip and storage solutions market, Micron's business tends to be heavily shaped by cyclical industry trends. The company's opportunities in the data center market could help drive relatively strong growth over the next five years and help reduce cyclicality over the stretch. However, there's still a lack of clarity on that front. For investors who aren't deterred by performance uncertainty and cyclical risks, Micron could be a smart buy at current prices -- but it's probably not a great fit for investors looking to avoid volatility.

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Keith Noonan has positions in Micron Technology. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.