Micron (MU 0.96%) stock is getting hammered again Thursday afternoon, down 3.1% through 12:20 p.m. ET.
Earlier in the week, if you recall, shares of the computer semiconductor memory maker tumbled after Edgewater Research 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 -2.12%), 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. By one measure, sales climbed 44.4%, and profits were up 60.7%.
That's great news for now. But turning to guidance, TSMC warned investors that Q3 sales will slow a bit, rising 38% at best, while gross and operating profit margins will both decline sequentially.
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.
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 -- $6.2 billion in net profit over the last 12 months. 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. It actually gives the stock a price-to-free cash flow ratio of 66.5, which is probably too much to pay. It's almost certainly too much if pricing and demand are getting worse, not better.
