Shares of Micron (MU) are under pressure as CFO David Zinsner said during a KeyBanc Conference that while the company still backs its fiscal fourth-quarter revenue guidance, sales for the first quarter could come in below the previously expected $5.4B-$5.6B range. Meanwhile, Deutsche Bank analyst Sidney Ho downgraded the stock to Hold from Buy as his "extensive checks" with the supply chain following Western Digital's (WDC) recent "lackluster guidance" left him feeling more negative on the supply-demand balance for the memory sector in the next several quarters.

WEAKER THAN EXPECTED Q1: In a fireside chat at Keybanc's Virtual Future of Technology Series Conference, Micron CFO David Zinsner said that the company continues to see fourth-quarter revenue at the $6B midpoint range, plus or minus 250M. "As quarters progress, things have been more back-end loaded than expected. We also gave guidance out one quarter because Q4 had this extra week. If you strip out that extra week and you look at Q4 at a 13-week basis, you get $5.6B, if you look at Q3 you have $5.4B. Somewhat in that range was what we were thinking Q1 would look like. But it might be somewhat weaker than that," the executive explained.

"We expect demand to improve. 5G looks like a pretty interesting market for consumers," Zinsner added, noting that DRAM inventory is still not ideal but "not unhealthy."

MOVING TO THE SIDELINES: Prior to Zinsner presentation on Thursday afternoon, Deutsche Bank analyst Sidney Ho downgraded Micron to Hold from Buy last night with a $48 price target. He tells investors that his "extensive checks" with the supply chain following Western Digital's recent "lackluster guidance" left him feeling more negative on the supply-demand balance for the memory sector in the next several quarters. Inventory build-up at cloud data center customers looks worse than he had anticipated, while demand from other end markets is weakening, said Ho.

He cut his Micron estimates due to lower pricing assumptions and said he expects consensus estimates to come down "sharply" from current levels. While the analyst continues to like the secular story of Micron and the memory industry, he tactically steps to the sidelines until he gets more clarity about the magnitude and duration of the current downturn.

PRICE ACTION: In afternoon trading, shares of Micron have dropped over 4% to $46.40.