Micron’s (MU) shares are experiencing another significant drop during the afternoon hours today, falling by approximately 3.1% before 12:20 PM Eastern Time.
In the recent past, you might remember that the stock prices of a company manufacturing semiconductor memory dropped, following Edgewater Research’s prediction that the cost and demand for computer memory chips could decrease in the latter part of 2025.
Today, similar predictions are being made by Taiwan Semiconductor Manufacturing Company (TSMC), the leading entity in the contract chip manufacturing sector, representing a 3.42% increase.
Why TSMC’s news should worry Micron investors
This morning, it was announced that TSMC had impressive Q2 revenue and profit growth. According to a key indicator, their sales increased by 44.4% and their profits soared by 60.7%.
The news is positive for now, but looking ahead, TSMC has cautioned investors that their Q3 sales might grow at a slower pace, with a maximum increase of 38%. Furthermore, they anticipate both gross and operating profit margins to decrease compared to the previous quarter.
Regrettably, the information aligns with Edgewater’s predictions from last week: The demand and cost for chips will both experience a “subseasonal” dip in the latter half of this year (specifically Q3 and Q4), implying that there might be a tendency towards worsening conditions rather than improvement.
Is Micron stock a sell?
Micron’s own numbers don’t give any more cause for optimism.
On Monday, I highlighted that the company has impressive earnings – a net profit of $6.2 billion over the last 12 months. Yet, the cash flow generated through standard accounting practices (GAAP) is notably less favorable: only about $1.9 billion in free cash flow during the same period.
A relatively small amount of money doesn’t seem sufficient to sustain Micron’s market capitalization of $126 billion. This amounts to a price-to-free cash flow ratio of 66.5, which could be considered excessively high. If the trend in pricing and demand is deteriorating rather than improving, it’s almost certainly too much to pay.
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2025-07-17 23:52