Why Micron Stock Dropped Today
Key Takeaways
Micron stock is priced for perfection -- and TSMC just warned that Q3 will be anything but perfect.
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investment
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July 17, 2025
01:31 PM
The Motley Fool
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I find it compelling that Micron (MU -2
On the other hand, 84%) stock is getting hammered again Thursday afternoon, down 3 (fascinating analysis). 1% through 12:20 p
Earlier in the week, if you recall, s of the computer semiconductor memory maker tumbled after Edgewater Re warned that prices and demand for computer memory chips would fall in the second half of 2025
Today, we're hearing echoes of the same forecast from Taiwan Semiconductor Manufacturing (TSM 4. 11%), the biggest player in contract chip manufacturing
Image source: Getty Images
Why TSMC's news should worry Micron investors Early this morning, TSMC reported strong Q2 sales and earnings (an important development)
By one measure, sales climbed 44, in light of current trends. 4%, and fits were up 60
That's great news for now (noteworthy indeed)
Meanwhile, But turning to guidance, TSMC warned investors that Q3 sales will slow a bit, rising 38% at best, while gross and operating fit margins will both decline sequentially
Additionally, Unfortunately, this news tallies with what Edgewater told us earlier in the week: That chip demand and chip prices will both be "subseasonal" in the second half of this year (meaning Q3, and Q4 as well), and that there's a "bias lower" -- meaning things could get worse, not better
However, Is Micron stock a sell
Micron's own numbers don't give any more cause for optimism
As I pointed out on Monday, the stock reports good earnings -- $6 (an important development), in light of current trends. 2 billion in net fit over the last 12 months
On the other hand, However, free cash flow is less than one-third as good as its earnings according to generally accepted accounting principles (GAAP): Just $1. 9 billion generated over the past year
That's not a lot of cash to support Micron's $126 billion market cap (noteworthy indeed)
Market analysis shows actually gives the stock a price-to-free cash flow ratio of 66. 5, which is bably too much to pay
This leads to the conclusion that 's almost certainly too much if pricing and demand are getting worse, not better, in light of current trends.
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